Watching for Continuation

Good morning. We start the week today after a new closing high on Friday, though without taking out the September intraday high of 2019.26, the only hurdle remaining before new all time highs. The question on most minds in the market right now is do we continue higher from here? The S&P 500 and US equity indices in general are starting to get a bit stretched on a number of measures after the bounce off the the October lows. A quick look at the technicals:

S&P 500, 3 minute bars

S&P 500, 3 minute bars

The S&P 500 is pushing the upper end of the trend channel originating from the October 22 inflection point. After getting locked in a wedge for most of the day Friday, the index broke out in the final hour of trade, closing near the all time intraday highs, but more importantly, near the top of the channel. Generally strength begets strength, so a strong close, all else equal, is a good sign, though risks obviously remain.

As we look the possibility of a push into uncharted territory, this trend channel, and ones like them, will become one of our primary guides for putting price behavior into context. They make for meaningful moving levels of support and resistance. As we continue within them, so we shall maintain trend positioning. As we put pressure on them and begin to break out/down, we will reevaluate and remove position exposure as conditions warrant.

S&P 500, hourly bars

S&P 500, hourly bars

We’ve left nearly all other important established technical levels behind for the moment, indicators such as prior trading ranges, swing bottoms and tops, and moving averages. However, these levels will still provide important indications of how potential support levels have moved over time with the market. Where these levels fall at any given point in time, we’ll keep you updated. Currently, 2000 remains the most salient downside support, though 2010 is not without some significance. The most important moving average levels that I follow, as I’ve mentioned before, are the 50, 125 and 200 day moving averages.

Good luck out there today. See you at the open.

-Will Mogey (Twitter: @wtmogey, StockTwits: @wtmogey)

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