Thesis statement
The objective of this study is to assess the possibility that the main American index has formed a bullish pattern called ‘Cup & Handle,’ with the handle in its final stage of breakout.
Development
Observing the price development on a weekly chart of the US500 Future, it’s possible to see a “cup” formation between January 2022 and July 2023, followed by a “handle” from July to October 2023. This “handle” was a natural correction to the upward movements from October 2022, a month in which the American index had tested the MA200 weekly as well as the 38.2% Fibonacci correction level of the “Covid” gains.
As shown in Figure 1, the “cup” appears perfectly formed, with the right side not reaching, as statistically occurs, the peak of the left side. The same analysis can be applied to the “handle,” which, statistically, retraces between 38.2% and 61.8% of the rise of the “cup.”
Finally, the “handle” developed perfectly, as indicated by previous studies (https://www.nishikigoinvestment.com/22-09-2023-us500-future-confirmed-a-bearish-hs/), with a confirmed bearish “Head & Shoulders” pattern through the downward breakout of the neckline. This was followed by a test and bounce on the 38.2% Fibonacci retracement level, a retest of the neckline from below, and ultimately reaching the price target at the 50% Fibonacci level. As hypothesized, this is where the new medium-term bullish movement likely began.
Conclusion
Although long-term chart patterns are statistically less likely, to date, applied mathematics to the chart has allowed for the prediction of price movements with incredible precision. Furthermore, in the event that the “Cup & Handle” is confirmed with a breakout of the handle followed by breakouts of the highs of July 2023 and January 2022, it would project prices upward for a bullish market in 2024/2025, in line with a series of mathematical forecasts and macroeconomic developments. In order:
Mathematical: This refers to the study on the SuperCycle of the index, which is detailed in the following link: https://www.nishikigoinvestment.com/us500-future-monthly-elliot-view/
Macroeconomic developments: These include the US elections, the Bitcoin halving (which statistically leads to an 18-month bull run), and the beginning of the Federal Reserve’s interest rate reduction path. This reduction in interest rates would bring liquidity back to Growth stocks, leading to a portfolio rotation after a concentration on the “Magnificent 7” (Apple, Amazon, Tesla, Microsoft, Nvidia, Google, Meta). See: https://leverageshares.com/fr/insights/big-7-vs-reality/.
This hypothesis is obviously bullish, it remains within the realm of probabilities, and is subject to inevitable corrections. Finally, since it’s a weekly movement, in terms of “timing,” one must adopt a monthly perspective.
Please note that the information provided is not financial advice. It’s important to conduct thorough research and consider consulting with a financial professional before making any investment decisions.
