Correcting Through Time

Good morning. I’ve been on the road for the past few days, but I at least want to get out a quick update. We’ve seen some activity in the past couple days following a week of relative calm. The S&P 500 and most major indices made new intraday and closing highs yesterday. After the pop at the open, the markets climbed higher in an orderly fashion into the afternoon.

The close was surprisingly weak however, with a break below the channel that defined trade for most of the day. While there are no firm conclusions to draw from this EOD weakness, it was nonetheless an anticlimax, which left me somewhat suspicious of how trade might develop the following day.

S&P 500, 1 minute plot

S&P 500, 1 minute plot, 2014.11.18

Not surprisingly, the weakness has carried though into today, bring the S&P 500 back down to support around 2040.

S&P 500, 1 minute plot, 2014.11.19

S&P 500, 1 minute plot, 2014.11.19

The close today becomes an important indicator of the strength of the most recent leg of the move originating from October 15th. We may very well just be looking at normal give and take price action here, but how the market closes today will be a clue as to whether this may or may not be the start of a more significant retracement.

S&P 500, 10 minute plot

S&P 500, 10 minute plot

Looking at the 10 minute chart from yesterday post close, its clear that despite the sideways price action over the past week, the market held up well, and registered no breaks out or down from the bounds of the recent trend path originating November 3rd. This is a healthy and constructive development. For now, there is every indication that the market will trend higher within this channel.

Still, we should remain wary as always for breaks from these levels. Currently, the most significant of these near term levels fall around 2033, 2040 and 2059.

S&P 500, daily plot

S&P 500, daily plot

Beyond those levels, we can refer to the daily chart for major moving average levels to the downside, and multi-year resistance to the upside. Longer term resistance overhead currently falls around 2078, likely not to be in play for the next week or so, but not really that far off either. Below, the 25, 50 and 125 day moving averages currently fall around 1986, 1977 and 1967, respectively; far enough below to be effectively out of play for the time being, but good to keep in mind just in case. One never know what will happen in these market.

We’ll keep you posted as trends continue to develop. Good luck out there.

 

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