Into Laszlo’s Trading Room: S&P500 Almost on the Go

Looking at the S&P500 chart we can consider the structure as an ending diagonal in Intermediate wave (5) of Primary [5] position.

The diagonal has been under construction since October 2014 when price carved out the Intermediate wave (4) low. The S&P500 has started to respect every possible resistance from early December and has played ping-pong for 6 months now. The range is not fully horizontal instead prices drag to new highs lacking any enthusiastic follow through succeeding breakouts.

Daily bar chart of the S&P500 index with Elliott wave labels and some classical technical analysis notes

The compression of the trading range in March made the life of overnight short term traders miserable as the daily signal triggers did not produce more reward than risk. The range-in-range shape narrowed even further in mid-April while sticking to the top resistance levels. This kind of price action typically precedes a breakout, but the ensuing bull leg might be quite slow and choppy hence the lack of confidence of buyers persists.

You can filter out these periods by using RSI. When it just bounces up and down around its moving average and the 50 level, just mark the support and resistance levels on the daily and flip to smaller time frame charts to take advantage of the mostly clean and sudden intraday moves the same way as you would do on a smoothly trending daily chart. Return to the original (larger) time frame only after the price action leaves the range – one side or the other. Right now the daily is not tradable and that might be the case for several days despite the good chance of a breakout. Forecasting a possible breakout is one thing but choosing strategy that fits both the probability and the rhythm of the price action is another.

10-minute chart of the S&P500 - A slow breakout with several tests would fit the context picture.

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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