The SPX opened yesterday with a gap and ran to R5 where it was promptly turned back lower. As you can see above, the support line S6 which is drawn off the first significant pull back after the explosive phase of the rally, failed to support the SPX much at all. Interestingly, S6 was failing at the exact time President Obama was heralding the G20 Summit reforms as, "turning point" in the world's quest for recovery. All important turning points start with very minor technical failures. I don't think it's likely but it would not surprise me one bit if the "turning point" actually ends up being the end of this intermediate-term upmove. I'm not saying any thing negative about our President or any of the world leaders, this is just how the market often works.
In the short-term,
yesterday's opening gap will put pressure on the SPX to drop back down to fill the gap. As the gap opened it jumped through a minor line of resistance (S7) which should now act as support as the SPX comes down. Normally S7 wouldn't even be worth mentioning but any time a market gaps over something it becomes more important.
The gap also created
a little Island Reversal pattern which is an area of pricing separated on both ends by gaps at similar levels. That pattern implied a move higher equal to the height of the pattern but that happened immediately upon yesterday's open. While interesting, Islands are of minor importance in the SPX chart.
In Summary,
I think probability has the SPX eventually dropping down to S7 but not quite filling the gap. The failure to fill will be due to lots of buyers in and at the high side of the gap. Those buyers should launch another run up to attempt to break out of the important R1 (in charts below) which is now only about 25 points overhead. A break above R1 would be a very bullish indication and I think the SPX is going to make multiple attempts at a break. It's going to be interesting to watch how the SPX acts as it attempts those breakouts. For now I plan to wait on the sidelines and just watch the show.
Friday, April 3, 2009
SPX Turned Back by Short-Term Resistance
The SPX opened yesterday with a gap and ran to R5 where it was promptly turned back lower. As you can see above, the support line S6 which is drawn off the first significant pull back after the explosive phase of the rally, failed to support the SPX much at all. Interestingly, S6 was failing at the exact time President Obama was heralding the G20 Summit reforms as, "turning point" in the world's quest for recovery. All important turning points start with very minor technical failures. I don't think it's likely but it would not surprise me one bit if the "turning point" actually ends up being the end of this intermediate-term upmove. I'm not saying any thing negative about our President or any of the world leaders, this is just how the market often works.
In the short-term,
yesterday's opening gap will put pressure on the SPX to drop back down to fill the gap. As the gap opened it jumped through a minor line of resistance (S7) which should now act as support as the SPX comes down. Normally S7 wouldn't even be worth mentioning but any time a market gaps over something it becomes more important.
The gap also created
a little Island Reversal pattern which is an area of pricing separated on both ends by gaps at similar levels. That pattern implied a move higher equal to the height of the pattern but that happened immediately upon yesterday's open. While interesting, Islands are of minor importance in the SPX chart.
In Summary,
I think probability has the SPX eventually dropping down to S7 but not quite filling the gap. The failure to fill will be due to lots of buyers in and at the high side of the gap. Those buyers should launch another run up to attempt to break out of the important R1 (in charts below) which is now only about 25 points overhead. A break above R1 would be a very bullish indication and I think the SPX is going to make multiple attempts at a break. It's going to be interesting to watch how the SPX acts as it attempts those breakouts. For now I plan to wait on the sidelines and just watch the show.
