SPX ends the month of October with a massive Hammer candlestick, which removes the scenario of a deeper correction. Hence higher prices should be expected in an extension of the pattern from the October 2011 lows.
Where are located the next resistance zones?
In the weekly chart we can see that above the September peak (2019.26) we have:
- The upper Bollinger Band which coincides with a trend line resistance from the July 2014 peak at 2036 +/- (If the Ending Diagonal scenario pans out this trend line should no be breached)
- Long term trend line resistance in force sine May 2013 which by the end of December will stand at 2095 +/-
Regarding the weekly time frame supports we have:
- Support 1 at 1986
- Support 2 in the range 1974-1968 (If the up trend has been resumed the 20 w ma should hold)
- Support 3 at 1951
Last week I suggested two potential patterns:
- Retest of the panic lows with a Flat or a Triangle. Obviously today this pattern is not the frontrunner simply because price will have to breach the 50 d, 20 d and 200 dma
- From the February 7 low price is forming an Ending Diagonal, which will conclude a Triple Zig Zag from the March 2009 lows. If this is the case price should be close to complete the wave (A) of a Zig Zag that will establish the third wave of the Ending Diagonal
SPX last Friday soared with a gap up and go after the Bank of Japan boosted its asset-purchasing program. We have a daily Marubozu, which per se is suggesting more follow-through to the upside but often a small range body, which would indicate buying exhaustion, follows it.
If we are approaching a short-term top the levels to watch to the downside are:
- Support 1: Range 1994-1985
- Support 2: 1968-1964 (Flat 50 & 100 dma)
- Support 3: 1949
- Support 4: 1935 (Rising 20 dma)
- Support 5: 1912 (Flat 200 dma)
In the following 60 min chart we can see that price could be forming a small rising wedge. If the wedge pans out and price breaches the accelerated trend line (Blue TL) then probably a sharp but short-lived pullback should not breach the 200 hourly ma which today stands at 1940.
The SPX rising wedge should pan out if VIX is forming a falling wedge: