I do not believe in forecasting. Forecasting is pure entertainment and it should happen far from serious areas it's used today.
There are many reasons, but the main one is the abysmal track record of all those who try to guess the future.
It does apply to all areas, trading, investing, markets, politics, science, IMF, Fed, ECB, etc. Humans, as individuals and as organizations, are unable to predict events correctly. It's a real limitation we have to live with, despite wishes, dreams, stubbornness. Studies are very clear about the failure of human forecasting. It may happen that occasionally the forecaster is right. It's pure luck, not a skill.
What we successfully can do is to stay with the trend and get indications about trend weaknesses and possible reversals. And here comes Heikin-Ashi with its design.
The case study today is S&P-500 and how Heikin-Ashi can be used for this purpose. The tools are Heikin-Ashi charts and indicators in three time frames: daily, weekly, and monthly. No voodoo.
S&P-500 daily chart
The short time picture is bearish, with a clear downtrend (lower lows, lower highs). You can notice reactions in this downtrend, highlighted by sequences of white Heikin-Ashi candles. Another proof of an existing downtrend is the number of red Heikin-Ashi candles which greater than that of white candles. The second panel shows the index at a resistance defined by the trailing buy-stop. It concur with a haDelta (panel 3) at historical highs. The conclusion is that the probabilities of a top and reversal here is greater than the odds for a rally. If you look at the haOscillator, you see it at 98+, most probably an end of the rally.
S&P-500 weekly chart
Even here we have indications of a downtrend from the top (lower highs, lower lows). Again, the number of red Heikin-Ashi candles surpasses the number of the white ones which is a confirmation of the downtrend. Two positive signs: (1) haDelta is above its short average and (2) a positive divergence price :: haOscillator (but not with haDelta). Given the fact the buy-stop is @4,187 (+7.37% from today), the odds to trigger the buy-stop are minimal in the absence of unexpected positive news.
S&P-500 monthly chart
The monthly chart is clear about trends: the index is in a pullback from the bullish uptrend and the trailing-stop has been violated. True, there are still three more days of this month and the close could spike above the broken stop. Further proofs of the uptrend deterioration are haDelta + haOscillator which show signs of weakness since the middle of 2021. The oscillator is at a low value (6.92) but its shape at this level points to a (down)trend continuation.
S&P-500 yearly chart, a bonus
Normally outside a normal analysis, the yearly chart adds to the negative picture. The close is 3,900, above the trailing-stop @3,854.96 but the we are only six months into 2022 and the second half is open to all surprises. haDelta is below its average (negative) and haOscillator is coming down from extreme levels. It's interesting to see how June will end in order to see what happens with the trailing-stop. If broken, the new high buy-stop needs to be surpassed to maintain S&P-500 in a long-term uptrend (panel 2)
-
