Pullback Pathway Planning for the SP500

What S&P 500 levels are we watching and what are we planning for the immediate trading strategies this week?

Let’s start with the Daily Chart and plan a “Pullback Pathway” tempered with an “Alternate Breakout”Plan:

As I continue to highlight in the Game-Planning Daily Membership, classical odds favor a pullback or retracement down against the 1,875/1,880 index level.

We’ve seen four reversal candles at the highs along with a negative momentum and volume divergence.

While that certainly doesn’t guarantee a pullback, it does suggest that the logical thesis would be to expect a retracement down from current resistance at least toward the 1,850 confluence of the rising 20 day EMA and prior price high polarity level.

I also highlighted prior events where price broke to new highs, triggering an immediate “Short Squeeze” or upside breakout to continue the trend.

In all cases, short-sellers helped contribute to the upside action with their collective stop-losses that triggered at each new high.  The Alternate – yet equally valid – thesis would call for long/bullish trading tactics on an breakout above 1,880 which could set-up a one-way pathway straight to 1,900.

Here’s the hourly chart for additional short-term planning:

I drew horizontal lines from each short-term new high to call your attention to similar recent scenarios.

There was at least a “pop” or impulsive move up after price broke above the prior highs, again triggering both stop-losses from the bears/short-sellers which combined with bulls/buyers putting on new breakout positions or else adding to existing positions.

That’s simply what we’re planning for at the moment – a logical downside price pathway to trigger a sell signal here and under 1,870 (which opens a “dominant thesis” play toward 1,860 then 1,850’s confluence) or an alternate breakout thesis that throws all the divergences out the window and suggests a straight-up impulsive moment toward 1,900.

As traders, we’re not here to predict the future, but to set-up an unbiased, objective game-plan that allows us to adapt in real-time to what actually happens in price – not what logically should happen.

Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).