More and More New Highs these days for the S&P500. Seems everyone is talking about 2100 or 2150. In my experience when everyone is talking about it, it has a good chance of being set up for a sell off. But who knows? Then I saw something interesting in a FB post by a trader friend of mine that pointed out something I hadn’t noticed. Looking at it now, I can’t believe I hadn’t seen it, it seems obvious to me now. So I decided to look at my own charts on it.
This is a look at the daily chart of the S&P500. It seems that since July it has been creating a Megaphone pattern that after Octobers 150 point unilateral run, is now closing in on the resistant trend line in the 2035-2045 area. Based on this chart, this 2035-2045 area is a decision point. It could get a jump in volume from the buyers and close above 2045 here, in which case I would probably start leaning long. Or this area could be a prime candidate for a reversal. Of what magnitude one would have to wait and see. However there are a couple area’s of interest that I thought I would outline.
Pushing these highs is now seeing an increase in volume. Rather it is decreasing as prices move higher. Not a great sign for breaking through resistance in my experience. Also, looking back to the August swing low and using a FIB Retracement on this move up, a reversal and move back to test the 1900 area of support would be a great set up as an Inverse Head & Shoulders pattern and also fall perfectly into the 61.8% retracement area of the present move up.
Next stop, should price continue through the 1900 area then next we could see price move towards the previous swing low in around the 1813.00 area for another test. Then – the full Megaphone after that could see a test back as far as the 1750 – 1730.00 area. Now I am not making any trades on this yet, as I don’t think there is any goo indication of what direction this market will take yet. I don’t like low volume moves at the very top, they don’t fit my trade criteria. I prefer clarity in what I see and I don’t have it on this just yet. However it is something I am watching and considering in planning for the next trade on the ES for me.
Crude has been under a lot of pressure lately, spending a few months now constantly hitting new lows. It has blown through any support it has hit since it bounced at the $91.00 area. Since that it has been straight down $15.00 and has been testing the $76.00 area the last few days. I don’t think a retracement at some point here is out of the question, The weekly chart shows the $74 – $76 area as an area for reversals. However, the bottom buyers have been hammered on this move over the past couple months and being a bit gun shy on going against a move like this could probably save you some pain.
If price moves through the $75.00 area then it looks like the next stop will be $71 – $72.00. Seems it should be a great time to be invested in refineries as they love keeping prices the same (or a real small drop) and steepening the spread.