Live Wire

Markets ended the day substantially lower yesterday, resting on near term uptrend support, and just below a pocket of significant resistance. Today, we’ve managed to bounce off of support back into the pocket (between top two blue lines on 30 minute chart). The charts from yesterday and today are shown for comparison.

S&P 500, 30 minute bars

S&P 500 yesterday at the close, 30 minute bars

S&P 500 today, 30 minute bars

S&P 500 today, 30 minute bars

What this indicates is that the near term move is still adequately supported such that the possibility of an upside breakout is still very much on the table. That said, the market is testing the support to an extent we haven’t seen since the February lows. Furthermore, the rate of gains is decelerating, as can be seen from the near term trendlines on daily chart below. This is completely in keeping with the beginning of a topping pattern, though this is not to say we’ve seen the highs for the move. It could also represent the “pause that refreshes”, setting the stage for renewed upside.

S&P 500, daily bars

S&P 500 at yesterday’s close, daily bars

This is all to say that the market is sitting on a live wire, in a pocket with potential to go either way. For the bears, a break below both the blue and teal trendlines would present a great short trade opportunity. For the bulls, a decisive break above resistance at ~2070 would present a great long trade setup, with a clear threshold for a stop order should we see a false breakout.

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