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Wednesday, December 4, 2013

12/3/2013

Some pretty dramatic price action today. After both a break of the short-term trend line, as well as breaking the lower part of what appeared to be a flag forming, sell offs ensued and we hit a low of 1787.85. That low happens to be a bit past the 61.8 fibonacci retracement between the most recent highs and lows.

I could easily see more downside tomorrow, however on balance volume decreased significantly, which is a pretty decent warning this down wave is not be trusted for long.


S&P 500 Daily Chart



Assuming things progress downward, 1775 appears to be very significant. The most recent trough bounced off of this level, and prior to that, the market topped twice before breaking through and rallying again. This level could be serving as a neckline for a head and shoulders pattern, but we have many days in order to confirm this. 

Of course, now that we've broken a trend line it will remain on the charts to serve as a resistance guide, which appears to be 1806 tomorrow.


S&P 500 Daily Chart



Whether or not the market breaks today's low will be a very helpful signal. If that happens the race to 1775 could begin. If sell pressure still remains, a 20 point drop may not be out of the question. Either way, very short term downside seems viable then we'll see.

S&P 500 4 Hour Chart



S&P 500 1 Hour Chart

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