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Corey Rosenbloom

S&P 500 Must Break Through Key 945 Level To Confirm Breakout

By Corey Rosenbloom on | More Posts By | Author's Website

I take it the morning’s upward move is a shock to many traders – let’s take a quick look at the daily chart and a particular look at the 945 price level and why the market needs to exceed this level to confirm a breakout.

S&P 500 Daily:

I mentioned in my prior posts on the “Descending Triangle in the S&P 500” and also “S&P 500 Consolidates in Tight Range” how it would be best to wait for a confirmed breakout to occur before trying to position yourself for an eventual breakout – all the traders with whom I spoke were anticipating a downward break.

Price consolidations are tricky to trade, and many times, price will eject outwards in the opposite direction than anticipated.  Sometimes the initial break will be false (a trap) which often leads to a larger than expected move in the opposing direction after the trap is “sprung.”

The dominant short-term technical pattern appears still to be the descending triangle, which has a price projection target upwards of about 950 on the S&P 500.

To project price out of a triangle, take the height of the triangle (925 minus 875 equals 50) and then add this value to the point where price broke upwards (about 900).

This gives us a target close to confluence resistance at the 945/950 level from January’s high.

Watching 945/950 is important, because if bulls can push prices and hold them above 950, then we will officially classify price on the daily chart as being in a confirmed uptrend (having formed a higher low, higher high, and then taking out a key swing high… along with the structure of the 20 and 50 EMAs being bullish and price being above the 200).

The volume pullback on the chart is actually slightly bullish because volume (participation) is expected to trail off during a correction and pick-back up once the prevailing trend resumes – let’s see if we can get a higher volume reading today that breaks above the red volume trendline I’ve drawn.

So 950 is the line in the sand – it’s the last place bears can logically place their stops.  If bulls can hold above that level, they would have pulled off an amazing coup that seemed to run afoul of fundamental, quantitative, and technical analysis (resistance) observations.

It’s partly that reason – so many short-stops being taken out – that has added fuel to the rising price fire because so many people were caught leaning the wrong way.

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