Here is an HOURLY S&P 500 chart with the runup of February on the far left, the March 1st high, a low where the lower trendline is originating from, a lower high #1 where the upper trendline is originating from, a lower low #1, and then a lower high #2. We are awaiting to see 1) if the Lower Low #1 is violated, –OR– 2) if the Lower High #2 is violated. If the Lower High #2 is violated, it “could” simply replace the current Lower High #2 unless the Lower High #1 is also eclipsed.
Note from April 6th onward, a downsloping channel has formed which was violated to the upside to start today’s trading, but price was rapidly rejected back into the channel. In a strong market, a break above a channel leads to more buying, not immediate selling. If you look at a daily chart, you will notice that price was being supported by the 50-day moving average up until April 12th. Since that day, price has been rejected downward by the 50-day moving average. The moving average is still rising, but beginning to roll over. Remember my Mentor, “Nothing bad happens when price is above a rising 50-day moving average.” Well, price hasn’t been above it for a week and it is considering turning from rising to falling. The opposite saying would be, “Bad things *can* happen when price is below a falling 50-day moving average.”
I feel fairly safe in saying that today’s high is a fairly strong resistance level for the stock market based upon the immediate selloff seen today. Last week’s highs around 2365 are getting close to the falling trendline connecting the Lower High #1 and Lower High #2 that should also serve as fairly strong resistance for the stock market. A daily close above either of those levels would be a high probability BUY if you have available funds, with reconsideration of your purchase if price closes back inside the upper trendline after closing above it or makes a lower low below 2322 S&P 500. If you are a trader inclined to short the market (using ETFs such as SH or SDS, or buying PUT options), those overhead resistance levels would form excellent areas to lean against with your stops.
Looking ahead…*IF* the market makes a new low below Lower Low #1, I would expect an Inverse Head & Shoulders pattern above the lower trendline to form before taking us back to All-Time Highs (near 2300 for example) –OR– we simply tag/mildly exceed the lower trendline currently near 2270 before rallying back near the top of the formation or All-Time Highs. Simply stated, there are indicators I follow that does NOT indicate the March 1st high was THE high, but that price will revisit or exceed that level at some point in the relatively near future (2017 most likely or possibly early 2018). That next high has a fairly high probability of being a cycle high worth paying attention to.
Please note that in today’s market, while the DOW was down 100 points and the S&P500 was down a handful of points, the NASDAQ was UP. If the sky were truly falling, and we all needed to run for the hills, wouldn’t the NASDAQ be joining the slide? Watch the channel that has formed since April 6th. Watch today’s high and last week’s high as well as the top trendline connecting the Lower Highs. The stock market can’t be falling apart if price moves back above them (and the 50-day moving average).
Thanks for reading and please tell a friend about this blog. The Market Alert update will be going out to subscribers after the close on April 28th. With the stock market moving lower since March 1st, wouldn’t it be nice to have a long term management strategy for your long term investments?