It may seem like I’m repeating this for the hundredth time, but: a trend change is a process not an event. The obvious sign of the bears’ courage, and also doubt on the buyers’ side, is a lower high forming on the price chart. It is the first time since May 2012 when a lower high convergence is visible even on the weekly time frame. As such it is a milestone toward the change of trend; but, for now, it only testifies about a ranging market – especially when you glance at the daily 14-period RSI indicator. Neither the bulls nor the bears could get into the sustainable trend zones, therefore their fight has become a trench warfare.
This is an environment when support at 2,040 and resistance at 2,105 are both earn respect, but in between, price runs clean most of the time and hits stops right at, or a little beyond, significant levels. None of the parties have the audacity to break through the enemy lines, yet.
If the range persists for a while, then the probability of a bear break increases, and we can get to the next milestone toward the confirmed trend-change with a break of the February low. Until then, it is best to assume that we are in a trading range and choose our poison (strategy) accordingly. Be cautious, any large trend bar can bounce fast when it enters resistance or support.
Next time we will look closer into the short term wave structure but it is more important to understand the sideways context than interpret each wave within the structure. Ranges usually leave too many short term scenarios on the table.
The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.