Short Term Bracket Levels in the SP500 and Dow Jones

Nov 4, 2011: 8:36 AM CST

After a stellar October, the US Equity Markets have paused briefly between two main bracket (confluence) levels.

Let’s take a quick look at these levels on the daily chart and use these for trade planning:

Let’s drill down to the simple levels and you can build plans from there.

After triggering a terribly violent Bear Trap in October, resulting in a large “Popped Stops” short-squeeze all the way up, price traded into the 1,300 target and then pulled back from there to the lower support zone.

So, as it stands now, the Daily S&P 500 shows MAJOR (short-term) confluence support from 1,200 (round number) to 1,220 (price and 20/50 EMAs).

1,220/1,200 will be the floor the Bears will be watching and will likely jump in aggressively short UNDER 1,200 (could see 1,100 again).

On the upside, we have two levels to watch, with the first being the 200 day Simple Moving Average (a key reference) at 1,273 and then above that is 1,300 (round number).

Though you can’t see it above, there’s a major horizontal “Polarity” Trendline at 1,295 which held as reversal support and resistance through 2011.

As simple as possible – 1,200/1,220 is confluence reference support (bear under; bull above) while the 1,270 but mainly 1,295/1,300 is confluence reference resistance (bull above; cautious beneath).

Though the numbers are different, the logic is the same on the Dow Jones (below) and NASDAQ:

The Dow has its confluence support from 11,600 to 11,700 (price and EMAs) while its upper resistance is 12,000 (200d SMA and ’round number’) along with 12,300 (recent high).

An upper breakthrough could lead to an impulse to 12,800 or 13,000 while a lower breakdown under 11,500 could revisit 10,800.

Sometimes it’s helpful to pull back to look at objective price levels like these and build bull/bear strategies from there, depending on how price acts/reacts at these levels.

Corey Rosenbloom, CMT
Afraid to Trade.com

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5 Comments

5 Responses to “Short Term Bracket Levels in the SP500 and Dow Jones”

  1. Terlyn12001 Says:

    It seems to me that it might be forming a diamond top.

  2. SRSFinance Says:

    Those upper blue lines break and I'm betting some serious money gets put to work. Funds are after all underperforming and who wants to be the fund manager that missed the 4th quarter rally in a year like this?

  3. Corey Rosenbloom, CMT Says:

    True, that's what I'm hearing as well.

    There's also the bullish end-of-year bias so we'll look to jump in on any upside breakout above 1,300 – should trigger the beloved “Popped Stops.”

  4. Kirk D Says:

    I'm looking at the same levels and although we seem to be above some good support the MACD and other momentum indicators show some bearish divergence…any thoughts on these Corey?

  5. Quick Charting Trend Levels to Watch in Crude Oil | Afraid to Trade.com Blog Says:

    […] This is somewhat similar to the structural ‘range’ resistance levels in the S&P 500 at the moment. […]