Updating SP500 and INDU Swing Structure and Key Levels

Nov 2, 2012: 10:23 AM CST

What are the key Daily Chart levels in the S&P 500 and Dow Jones Industrial index and – taking it one step further – what does the current swing structure suggest about the next move?

Let’s update the Daily Charts and Intraday Structure Charts for these indexes, starting with the S&P 500:

A quick look at the Daily Chart shows us the current EMA resistance cluster near 1,430.

This will be the key pivot level that will define a bullish bias (breakout) above 1,435 and 1,440 (which would target 1,460) or else a continuation of the bearish swing structure in motion which puts 1,400 then 1,380 as potential downside targets.

It will be very important to note how the market closes Friday and behaves on Monday relative to the overhead EMA resistance cluster.

The Swing Structure similarly rests at a turning point:

Check out my prior update on “Swing Structure” to see how price behaved as expected in terms of reversing and trading toward lower targets (educational reference).

Now, we face a similar situation in terms of the structure, meaning classic structure suggests a  turn lower may be more likely than a powerful upswing continuation or breakout.

This time, I overlaid price distance to the swings in order to highlight the progression.

In looking at structure, our main goal is to assess trend and we do so simply by measuring the reversal points or swing highs and lows.

A downtrend is a series of lower lows and lower highs while an uptrend is a progression of higher highs and higher lows.

We can take it one step beyond by quantifying price distance traveled on swings with the thesis that price travels more distance in the pro-trend swings and less distance in the counter-trend retracements.

Intraday Structure started to reverse in mid-October when price pushed to a lower low (covering more distance on the way down) and rallied to a lower high (again with less distance than the downswing).

From there, price impulsed 60 points lower confirming the downtrend and at the moment, we’re seeing a rally higher which is where we focus our attention.

Structure will tilt to the bullish case (breakout thesis) if two things happen:

  1. Price breaks above the 1,430 Daily Chart resistance cluster
  2. The current intraday swing (in motion) trades GREATER than 38 points.

Price rallied 38 points on the prior upswing in mid-October to give us that reference.

That’s what we’ll be watching today and into next week:  Will price break resistance and will this current ‘retracement’ swing develop into an “impulse” swing.

The situation is identical in the Dow Jones, yet the current resistance cluster is perhaps stronger:

The 20 and 50 day EMAs cluster (cross) exactly at 13,290 and of course that’s where we’ll focus attention as the key “Bull/Bear” Pivot.

A firm breakthrough above higher favors a stronger rally and strengthening of bullish structure but UNTIL that happens, we’ll focus on the potential for a stall into resistance.

The lower target remains the 13,000 “Round Number” and 200d SMA cluster.

Intraday Structure also reminds us that we are at a “make or break” turning point:

The last two bullish rallies traded up roughly 285 points.  That’s what we’ll compare with the current swing.

Adding 285 points to the recent swing low at 13,040 gives us a “similar structure” swing toward the 13,325 level.

Of course, it would be a very bearish sign if price failed to rally to this level – today’s high so far failed into the 13,300 price resistance.

Going forward into next week, let’s focus on the key daily chart EMA cluster resistance levels and the objective swing structure in motion.

It would be a very bullish development (potential intraday trend reversal) to break through resistance and extend the upward swing in motion, but unless that happens soon, structure seems to suggest a potential return to the prior swing lows.

Either way, what happens here will help shape our short-term trading plans and price targets for the next swing.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available!

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