Just as I was taking heat from bearish traders for referring to the candle we printed two days ago as a bullish hammer, allow me to equally irritate bullish traders as well, for good measure. Despite our exuberant gap up this morning, we are coming to terms with some tough resistance from the past week. The 1090-1095 level on the S&P 500 has been a brick wall since last Thursday’s swoon. Even if we do negotiate that area well, we have some difficult levels above as well.
The current hourly chart of the S&P 500, seen below, clarifies the short term resistance levels, as denoted by the yellow horizontal lines.
As I indicate on the chart, we may be trying to complete an inverted head and shoulders bottoming formation. However, I suspect we will need some more time to work through the right shoulder if we are going to make a healthy move up from here.
The overhead supply should prove to be formidable, as many traders have been eager to call a bottom to the correction over the past month. Many of those who bought the falling knife are now losing money on their trades, and have endured a scary ride down. If they come even close to being made whole today or tomorrow, they are more likely to sell than to hold or buy more, in my estimation.
… well said, chessNwine !
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LOL nice avatar
They say … In the land of the blind … the One Eyed Man is King !
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lol
Thanks for the heads up
Thnx for reading.
I am watching you says the CIA man.
“Yeah, you Focker!”
I am watching for volume ,
Is it me or are we lacking something today?
Is the market just being a Martha Focker?
Volume not impressive.
I completely agree with your overhead supply comment – that whole paragraph is gold.
As much as I’d like this to be the current market “bottom” (and I still believe it is) I think we have chop for the rest of the week. Either way we look at it, I think this SPY move higher isn’t going to be too significant at all, especially if it moves fast.
Tough and fast mkt
The lack of conviction in today’s tape is troubling… range-bound since 10:15 AM??? One way or t’other… a BIG move into the close today! Volume not impressive, is it?
volume uninspiring
Chess,
Your posts are awesome. Reading them helps me to avoid giving in to impulsive trading, I am always better off when making logical decisions rather than emotional. I was tempted to make some aggressive long plays this morning, but held off. The “brick wall” that is 1090-1095, is holding strong today again. I will wait to see what transpires….
Thanks for reading.
As someone once said: “(early bull + PPT hybrid + TYH Buy) – (PPT hybrid + TYH sell) = Happy trader + large % cash position.”
What a freaking market…
lol nice equation
Great read!
If I could get my new account opened which won’t happen until next week, I’d short this bounce for tomorrow.
Thanks man–just posted the wrap up.
A retrace to S&P 1150 might be in the cards. It’s also the golden 61.8% Fib retracement from the recent peak and the upper limit of the 1130 – 1150 box. This could be an interesting set up for a potential head and shoulders pattern forming since the end of 2009. Time will tell.
Funny how todays rally stopped right at the 200 day MA, though.
Hmmmm….
@ alphadawgg agreed on the H&S potentially setting in the near future, but certainly is early. Mostly cash, thanks to our buddy chessnwine and his insight. Expecting some more turbulance for the immediate term, based on headlines. G/L.
Mucho grande post chess…
Great post.
loving ur posts………………congrats on tab……….. own it!
ChessNWine,
If Volume is a concern today, doesn’ t this usually mean that we’re going to end up in a deeper correction than the “fat finger” mistake? It does not feel like a usual bull rally to me. I believe we’re setting ourselves for a deeper correction.
ryan–I am inclined to agree with you. However, it is important to keep an open mind. We could easily be in a 2004 scenario where we are correcting for a quarter before resuming the bull run.