Planning the Next Swing in the SP500 from Color Structure Chart

Jul 7, 2014: 11:53 AM CST

Let’s start our week with a simple “Color Structure” Chart of the S&P 500 and use it to plan a price pathway for the week.

We’ll start with the current intraday structure chart to set the stage:

The color structure chart shows a sideways rectangle (early May) which is a consolidation pattern and then the recent breakout above the 1,900 level that fueled the breakout and uptrending channel that took place through June (and now into July).

The main idea is that price tends to trade within trendline boundaries and we see a rising parallel trendline channel building the ‘structure’ for the current market.

Let’s zoom down to a closer perspective to plan our two price pathways to trade the next price swing:

If the structure continues, then we’ll simply expect price to swing down away from the 1,980 level at least toward the 1,970 Midpoint and then likely down to the lower rising trendline target which will soon intersect 1,960.

We base this logic on the two prior down-swings after price touched (tested) the upper rising trendline – the next ‘swing’ of price was a retracement toward the lower rising trendline target.

Of course, we can’t just plan for a logical outcome as traders; we must be prepared for alternate or unexpected events.

In this case, a breakout above the 1,985 level sets in motion another short-squeeze impulse that could instantly propel the market toward then above the 2,000 level.

When planning your next series of trades – and the next likely swing of the market – put it in context of the logical retracement (to continue the current structure) or the unexpected breakout and short-squeeze impulse straight toward 2,000 (breakout of the structure).

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Corey Rosenbloom, CMT
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5 Responses to “Planning the Next Swing in the SP500 from Color Structure Chart”

  1. July 7 Intraday Update Level Planning and Stock Scan | Afraid to Blog Says:

    […] The S&P 500 traded down from just above the 1,980 level on TICK and momentum Divergences into the upper trendline of a rising pattern (see this morning’s update on “Color Structure and Planning the Next Swing”). […]

  2. Updating SP500 Structure as Expected and Planning the Next Swing Again | Afraid to Blog Says:

    […] today’s market action is exactly what was suggested (a sharp downside swing) from the “Planning the Next Swing from Color Structure” chart I highlighted […]

  3. July 8 Sell Swing Intraday Update and Stock Scan | Afraid to Blog Says:

    […] continued the expected sell-swing already in motion and price achieved its downside target (see yesterday’s intraday update and level planning to recap the live analysis as it occurred now that we know the […]

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    […] July 7: Planning the Next (Down) Swing from Resistance – Color Structure […]

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    […] July 7: Planning the Next (Down) Swing from Resistance – Color Structure […]