A trench of warfare - illustration for the ranging SPX market

SPX sellers strike early

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.

Daily S&P500 chart with the weather forecast and range type trading confirmation from the RSI indicator
“This is an environment when support at 2,040 and resistance at 2,105 are both earn respect, but in between, price runs clean…”

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.

About Laszlo Nagyferenczi

Laszlo Nagyferenczi is a day trader, analyst and instructor as well as the creator of the proprietary Context-Momentum-Signal concept. He has authored over 200 blog articles about his unique approach to trading and the Elliott Wave Theory. His clients appreciate his ability to go from the theoretical to the practical i.e. all the way to the actual trade set ups. Originally hailing from Hungary, Laszlo is fluent in English and Hungarian with a long list of education credentials including BA in Economics, Certified Elliott Wave Analyst (CEWA), Certified Adult Educator for T-Groups, Professional Co-Active Coach (PCC) at CTI. The real education, though, has been the trial by fire in the markets, with real capital at risk.

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