The market went from trending up to now trending sideways. A consolidation of gains is not uncommon after a long up-trend. So now we're stuck in a sideways pattern that will eventually breakout to the upside or break down creating lower-lows and an unhealthy market environment. At this point, we're not sure which way it will go, but below you will see a few of the points which we are closely monitoring:
To feel short-term comfort, we want to see the S&P 500 break up and out of this "wind up", where it's consolidating between the two blue lines. Will it break up or break down? Not sure yet, but we're watching this closely. A break to the upside is a good sign and should eventually take the market back up to the top green line without much resistance.
- On the other hand, if the market drops below the lower blue line, you can assume it will drop and re-test the bottom red line. If it holds the red line and heads back up, it could be a short-term buying opportunity; however, if it breaks down, the market would be technically trending lower, which is not good, and we'll take measures to protect. We are watching these important levels very closely.
- 200 day moving average: We really want to hold and stay above this level. We are on very high alert when it breaches to the downside.
- 20 day moving average: More of a shorter term signal, but would be good to regain this and hold it.
S&P 500 Daily Chart
Source: Cannon Advisors, StockCharts data