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The market opened lower and proceeded to weaken into the first hour of trading. At that point, the familiar path brought the S&P 500 back to the low-1390’s, a level we have been observing for the past two months as either firm support or tough resistance. Since breaking back above it last week, the idea was to turn increasingly constructive on the market, albeit methodically legging back in as the bulls slowly regain their footing. Of course, holding above that level is extremely important.
With that in mind, as you can see on the intraday chart of the S&P 500 below, the bulls were once again able to place a strong bid and defend the low-1390’s. After the initial move lower, we have since stabilized and even carved out an intraday head and shoulders pattern to give us a potential gap-fill higher this afternoon. Moreover, individual breakout plays are being permitted to work by the market, which adds credence to the bull case.
I know that I have been repeating myself about this, but I continue to observe that low-1390’s area as a line in the sand. So far, it has worked exceptionally well for my portfolio in terms of when to heed caution and when to leg back in on the long side. I will keep watching it closely.
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The 4 hour chart shows this very clearly.. Check out the 200 period moving average on the 4 hour– seems to be tracking well the last few months.
Interesting, thanks.
I should have clarified that.. I was looking at S&P500 futures.. doesn’t track as nicely on the actual index or spy.