We may see a major resolution of the tight range in the S&P 500 this week.  Let’s define that range and see what the current S&P 500 Structure is telling us.

S&P 500 Daily Chart:

I could have drawn numerous trendlines and channels to show the price consolidation but decided to let the price speak for itself and note the ever-decreasing (consolidating/contracting) range on the daily chart.  The dominant short-term pattern from January 20 to February 9 is that of a tight contracting triangle with the 50 day EMA serving as the upper boundary and the red upward sloping line serving as the lower boundary.

One can pull back to a larger pattern to see a broader consolidating pattern or triangle compressing price down to its current level as well.  A more liberal interpretation allows us to see a potential inverse Head and Shoulders bottom pattern forming – I’ll try to discuss that more clearly if it develops (the current action would be the final right shoulder).

There’s clear resistance about the 900 level and clear support at the 800 level – both have been tested many times.  The last time price broke above 900 (early January) was only a false break and classified as a “Bull Trap.”  The resistance came in at the 38.2% Fibonacci retracement off the September highs to the November lows.  The corresponding Fibonacci grid is drawn which still shows this lvel – 944 – as resistance.

Support is clearly at the 800 level from multiple tests and from ’round number support’ but you see also that the sellers attempted to force us down through this level and failed also in November, putting in an intermediate term bottom.  Conveniently, the range to watch is 800 – 900.

The momentum oscillator is telling us nothing other than we’re range-bound and consolidating, and gives no clues about the future at the moment – most oscillators will likely be ’saying’ the same thing.

It’s probably best to wait for a break of either of these levels before taking action, and I’m thinking we’ll get resolution one way or the other this week.

Corey Rosenbloom
Afraid to Trade.com

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