SPX500 Remains Subdued as Q3 Earnings Kick Off

Weekly SPX500 Chart

As Q3 earnings season kicks off the SPX500 is looking subdued. It has charted a lower peak followed by a lower trough. This puts the weekly chart into downtrend. The black 30-week EMA is showing signs of support, but the candlesticks will need to break above the green down sloping trendline to show conviction.

The black 30-week-EMA has a slight uptick, which may be bullish but last week's candle is a long-legged doji. This is a candle of uncertainty – bulls tried to take the index up and bears tried to sell it down, but ultimately the index closed flat for the week.

The RSI, a measure of momentum, is under 50 (green rectangle), which is the bearish side of the indicator. If it continues to remain sub-50, the index will have a tough time breaking positively above the green trendline in the near term.

Daily SPX500 Chart

The daily SPX500 chart is trading in its neutral area between the blue bands. This is not surprising given last week's long-legged doji. However, we can track the progress of the index using the daily chart and its channels.

If the SPX500 daily candlesticks move into the channel between the upper blue and red bands, this will be considered bullish. Moreover, if the the RSI moves above 50 and holds, an underlying bullish momentum will be connoted, potentially driving price to breakout above the weekly green trendline.

However, if the index drops into the channel between the lower blue and red bands this will be a bearish development. If this is accompanied by the RSI dropping below 50 and holding, the bearish momentum is likely to dominate, playing into the weekly bearish trend.

Several factors will contribute to the SPX500's direction. If yields remain higher for longer this is likely to continue to pressure the index. Also, the Israel-Hamas conflict is creating uncertainty and risk which may act as a headwind. If the fighting spreads this will be an extra tension that market participants face. Also, we have just kicked off Q3 earnings. Profitability here and forward guidance will play a role in either acting on or supporting the SPX500.