Ringing the Bell

The rally off the February lows came swift, and it came strong. We’ve moved back to the top of the recent downward trending range, in blue on the 2 hour chart below.

S&P 500, 2 hour bars

S&P 500, 2 hour bars

As you can see, we’re now at a point where the short term and medium term trends are directly at loggerheads. This is one of those points where careful attention to price behavior is very important for clues regarding how to position for the next move.

S&P 500, daily bars

S&P 500, daily bars

As the daily chart show, over the last 10-11 months, the S&P has been here a few times before, “rung the bell” and turned right around, peeking its head above a couple of times. Still, this has proved to be a good place to sell on more than one occasion, and odds are good that it will be again.

However, there is always a risk that the market will simply blow through the resistance and keep heading higher. So it pays to never give it the benefit of the doubt. Decent selling points have consistently been presaged by an extended period of back a forth below resistance, trying to move higher, but suffering from a persistent case of failure to progress for at least a few weeks. So it may be wise to give this market some time to show its hand. It may look set to continue higher, but it may also be bluffing. Time will tell. Generally the best position entry points appear only after a number of decent, or even good, ones have come and past. Patience is a virtue for the successful investor.

Good luck out there.

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