Support Range Bouncing for the SP500
Despite the lengthy uptrend, the shorter-term S&P 500 has devolved into a sideways trading range with clear boundaries.
Let’s take a look at these boundaries, chart the current rally, and plan the near-term future for the market.
We’re using the @ES futures chart to highlight the recent trading range and the visual divergences that have taken place into the support and resistance range boundaries as drawn.
In simplest terms, the key focal point for the @ES futures include the 2,000 range high and the recent – today’s inflection – low into 1,970.
Price pushed beyond the 2,000 boundary to form a Bull Trap and we see the expected reversal/reaction back down to the lower support level (1,970).
At this point, we’re playing a bounce up off the 1,970 support target and are looking initially for the 1,985 midpoint, and even higher than that (targeting 2,000) should this bounce continue to fill-out the range as drawn.
We can see another perspective on the S&P 500 and why the current support low is so important:
A quick glance at the daily S&P 500 chart shows a key inflection (reversal) up off the prior price low and the rising 50 day EMA (1,978).
Price currently trades into the 20 day EMA at the 1,993 level and we’ll watch it for additional clues.
A clean breakthrough above the 1,995 level should lead to a continuation of the trading range back to 2,000 then the 2,010 ‘range’ high.
Whatever other analysis techniques you’re using, be sure to put price in the context of the current sideways trading range and critical inflection support – “make or break” – into 1,980.
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
Follow Corey on Twitter: http://twitter.com/afraidtotrade
Corey’s 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).
Corey,
I came across the True Strength Index(TSI) when Worden upgraded their software several years ago. After various various testing and research into the indicator, I have been able to come up with a quite successful swing trading strategy on TNA/TZA. (I don't trade futures-just selected ETFs)
Attached are 2 screens, 1 each of TNA and TZA with side by side 30 minute and 1 hour graphs. Both use the same indicators.
The top pane has price history along with various Exp Moving Averages. 18EMA is very key here for Buy/Sell.
The bottom pane has the TSI set at 11 7 with an EMA 4 of that result. There is also the CCI-18 indicator to a lesser use and confirmation.
http://screencast.com/t/Bzn5dh…
http://screencast.com/t/zQtR7o…
These examples show divergences and potential buy/sell points when the TSI crosses the zero line and price crosses the 18EMA.
This is just touching the surface. There is more on the web that I found if you are interested.
It is very important to know our strength and never try to go out from it. Trading in a range bound market is one of the most challenging tasks. Firstly we must trade with a company that is true ECN not desk dealer, therefore I would suggest OctaFX, they are a real ECN company and have even won award for the Best ECN broker. They allow us to directly trade with the global banks removing all the risk of manipulation or desk dealing, so it automatically give us better chance to fight the market.