Anticipating a Turning Sign

U-Turn sign

U-Turn sign

A week ago, I posted my Analysis and Outlook for the S&P 500 (SPY).  The venerable index was rallying off its Christmastime low and I was anticipating where and when the balance of power was likely to shift.  At the time, I was on lookout for a turn.  That watch is now heightened.  Here’s my update.

As you can see on my daily candlestick chart below, SPY is reaching technical resistance.  Bulls could be slowing their roll.

A Turn Upcoming

That level, marked on the chart by a blue horizontal line, represents: former support, a natural Fibonacci retracement of December’s precipitous plunge, and a bearish pattern price objective.  The confluence of all that evidence, plus low volume during the bounce and the time cycle for a turn fitting in, lends powerful weight to anticipation of a coming reversal signal over the next few trading sessions.

Daily SPY chart by Steven Sarnoff

Daily SPY chart by Steven Sarnoff, h/t stockcharts.com

SPY closed today’s session at $257.35, consolidating around a shorter-term moving average.  Downward sloping trendlines and lines of average price movement exert a negative influence on market price.

Key Levels

I spy overhead resistance in the SPY at: $259,  261.58-$261.72 and $270.  That is where I anticipate sellers stepping up to turn prices around.

Underlying support is now at: $256.50, $250-$252, $240-$246, and $233-$236.

What’s Next

There is no certainty market price will reach our line and turn.  But there is likelihood.  If the market does head south, the turn could accelerate and a retest of recent lows may be in the cards.

Buyers are trying to put in a major bottom.  If underlying support fails to hold, we may see another big leg lower.  If resistance is broken, bulls will be let loose.

Financial media always finds a story to fit the price movement.  Will earnings season equal flu season for stocks?  Options may inoculate your portfolio far better than the flu shot does for your health.

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Good luck in your trading!

Best regards,

Steve

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