Invest With Jacob: SP500 Technical Analysis (Elliott Wave Theory)

The stock market’s sideways trend has broken lower in recent sessions, following weeks of a deteriorating structure. Markets trended sideways as economic data hinted that inflation remained strong.

That data has been pushing up bond yields in recent weeks. The 10-year U.S. Treasury yield is now at its highest level in five months. That’s put some pressure on markets, as has other events such as rising global tensions. The net result? Markets finally selling off.

Looking at a market chart with an eye versed in Elliott Wave Theory, these events look like a logical progression.

Markets failed to gap higher on Monday, instead reversing lower. On an hourly basis, the past few days has seen the market make a series of lower highs and lower lows.

That’s bearish and suggests stocks will struggle in the coming weeks. The chart indicates a potential market pullback to the 5,000 level, where the markets have some support.

If selling remains strong, that support may be broken and stocks trend lower.

Measures of market fear and greed have also shifted from overly bullish to slightly bearish.

The good news? With markets breaking down quickly in a few days, the worst of the current selloff has like happened. And any positive geopolitical news could allow stocks to stage a relief rally.

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