Trendline and Target Planning for the SP500

Oct 10, 2013: 9:13 AM CST

Despite the market’s emphasis on headline news related to the government shutdown and looming debt ceiling debate, the SP500 has traded within the parameters of a larger trendline pattern structure.

Let’s update our analysis from the prior September 30th “Daily and Weekly SP500 Planning” post and note the current trade level to watch for trade decisions at the moment.

SPX SP500 Weekly Chart trade planning levels ema exponential moving average support

For the moment, there are two main factors to watch on the Weekly Chart, aside from the lengthy rising uptrend or ‘bull market.’

The first is where we’ll draw our attention relative to the Daily Chart trendline which is the rising 20 week EMA (Exponential Moving Average).

The 50 week EMA formed a confluence or downside price target objective with the Daily Chart trendline which we’ll see shortly.

Notice the second factor which is the persistent and sneaky triple swing negative momentum divergence which undercuts (fails to confirm) the recent market high into 1,730.

Divergences are caution signals or early reversal indicators, but we required price to break down from support to generate official reversal signals.

For now, that would be the 1,655 level which we  can see clearly on the Daily Chart:

SPX Sp500 Daily Chart technical analysis parallel trendline price pattern

After an intraday ‘spike’ and V-Spike reversal under the 1,655 level, price closed the day higher to form a bullish doji reversal candle which set the stage for this morning’s rally.

Buyers stepped in to support the market into the confluence target and so far, we’re seeing a rally develop off the Daily Trendline and Weekly EMA confluence.

Let’s see the market clear above the 20 and 50 day EMA as overhead resistance, and if so, it could lead to another upside play through “Open Air” to continue the Rising Parallel Trendline Channel uptrending pattern.

The larger risk for the market is that the structure fails and develops a reversal style pattern akin to a “Three Push” or “Three Drives to a Top with Divergences” pattern on the bigger picture.  The bearish breakdown/reversal scenario could be triggered by additional failures from Congress which is also where we need to be focusing our attention beyond the chart levels.

Study the prior posts from last week regarding the SP500 planning which include:

“Three Trading Lessons from the October 1 “Rounded Reversal” (lesson is applicable to October 9th’s “V-Spike” Intraday Reversal)

SP500 Awaiting Breakout from Daily EMA and Fibonacci Compression Level” (the market broke to the downside to achieve the weekly target)

SP500 Market Internals Turn Unstable to Start October

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Corey Rosenbloom, CMT
Afraid to Trade.com

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5 Comments

5 Responses to “Trendline and Target Planning for the SP500”

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