BEAR SIGNALS, EXIT STRATEGY, [edited from David Keller]
Note this is MEDIUM TERM, not intraday, not short term.
Here are four key signals that would indicate that the bullish phase has exhausted:
First: Each new month has seen the S&P break to new highs as stocks have traded onward and upward. If the index would attempt to make yet another new high and fail, it could indicate that the buying power from earlier in the year has dissipated.
Second: A lower low. A break below the most recent swing low (4360) would mean that the most recent support level was not holding. That could suggest an exhaustion of buyers and/or increased selling pressure.
Third: The 50-dma, which has served as consistent support through 2021, would need to fail ...The consistency of this moving average would tell me that a pullback to the 50-day is most likely a "buy on the dip" opportunity, as it has been all through this year. But what if this support level actually fails and price continues lower? Well then, a flood to the exits could cause a sudden and significant drop in the S&P 500.
Fourth: We'd need to see the RSI break below 40. Five of the seven brief pullbacks in 2021 have seen the RSI come right down to 40 before bouncing higher. If the RSI would break below 40, this could indicate a "change of character" where you may have to acknowledge a change in overall trend.
The good news is you don't have to know ahead of time which new high will be the last one. You just need to have a good exit strategy in place and let the chart tell you when the conditions have changed!
https://stockcharts.com/public/1684859