The Three SP500 Rectangles and How to Trade Them

Jun 1, 2016: 1:27 PM CST

As we begin June 2016, the S&P 500 has formed three clear Rectangles on the daily chart.

What does this mean and how are we planning our next series of trades right now?

As we focus specifically on price, we see THREE Rectangles or consolidation patterns highlighted above.

The first rectangle is the longest and tallest and took half of 2015 to develop before a breakdown lower.

As I’ve been highlighting in my member reports and analysis, we’re expecting a repeat phase of the late 2015 pattern.  So far, that’s precisely what we’re seeing.

In late 2015, price hovered between the 2,020 and 2,100 levels in a three-month trading range.

Another breakdown took us to 1,800 ahead of a “Repeat Pattern” back to the highs into 2,100 where we are now.

In simplest planning terms, we’re going to keep trading the bounces WITHIN the range while price is between the similar 2,100 (resistance) and 2,040 (support) smaller rectangle currently.

Any upside breakout – ideally above the 2015 high – could set the stage for a powerful bullish “short-squeeze” impulse higher.

Otherwise, another breakdown under 2,040 that continues under 2,000 could be the catalyst for a third collapse lower.

Three Rectangles; Three Collapses?

If history repeats, we’ll see a downward swing into June/July… but if this time is different, we’ll jump back on the bullish bandwagon to new all-time highs.

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Corey Rosenbloom, CMT
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