The US Equity Indexes have formed a clear support range or rectangle price area between key short-term Fibonacci levels.
While that sounds more complicated than it actually is, let’s look at the key intraday and short-term critical support and resistance levels for trade and game-planning the next few swings in price.
We’ll start with the Hourly Chart of the SP500:
As we’ll see shortly, the SP500 is actually trading at a slightly lower level than its companion Dow Jones and NASDAQ equity indexes.
While the others are interacting with the 38.2% Fibonacci Level as the lower boundary of the short-term range, the SP500 actually formed its critical pivot point into the early May lows at the 1,625 inflection spot.
In each chart, I drew the short-term Fibonacci Retracement grid from the May high to the recent June low and we see each of the 38.2%, 50%, and 61.8% upward retracements as labeled.
For the SP500, the important levels for trade planning are the 1,625 support, 1,643 ‘midpoint’ resistance, and the upper boundary just shy of 1,655.
For trading purposes, we’ll continue playing bounces or “ping-pong” set-ups between these range boundaries.
For strategy and planning purposes, we will prepare to trade a breakdown under 1,625 to target 1,600 (very important support) or else a breakthrough above 1,655 to continue the higher frame uptrend and target 1,670, 1,685, and 1,700.
Note that the SP500 broke a falling ‘arc’ trendline on the spike-up (reversal) from 1,600. This is an example of how powerful ’spikes’ can come from breakthroughs beyond arc trendline events.
The Dow Jones shows similar planning levels:
As I mentioned, the “Rectangle Range” in the Dow Jones has developed between the 38.2% (15,111) and 61.8% (15,277) Fibonacci Retracement grid.
The Midpoint of the pattern is 15,192 or roughly 15,200 for easy reference. Making it simple, the upper boundary is 15,275 while the lower boundary is 15,100.
Like the SP500, a breakdown under 15,100 suggests short-term bearish trades to target 15,000 then 14,850.
However, a bullish higher timeframe trend continuation event triggers above 15,300 which targets 15,400, 15,500, and (yes) 16,000.
Finally, here are the NASDAQ range planning levels:
Like the Dow Jones, the boundaries have developed around the Fibonacci Grid. The upper resistance trades into 3,480 (3,473 is the 61.8% retracement) while the lower support level trades into 3,440 (38.2% at 3,437). We can draw a similar lower trendline into 3,420 to connect the ’spike’ reversal lows.
The Midpoint of the pattern or ‘halfway inflection zone’ is 3,455.
Similarly, a downside breakthrough targets 3,420 and a failure under the ’spike’ support of 3,420 targets 3,400 then 3,380.
A pro-trend continuation breakthrough above 3,480 that carries above 3,490 targets 3,510, 3,530, and beyond.
To put these intraday charts in perspective, here is a quick view of the SP500 Daily Chart:
The market is attempting a fourth successful pro-trend ‘flag’ retracement off the 1,600 key level (50d EMA) and after a two-day successful bounce, price stagnated into the 1,650 level and have traded loewr within the intraday patterns (range levels) shown above.
A bullish resolution would be expected above 1,650 to continue the strong pro-trend environment while a breakdown under 1,600 would be a signal of an official reversal of the short-term trend (the last time this occurred was October 2012).
Continue watching short-term/intraday price activity with respect to the higher frame thesis, monitoring whether this fourth retracement or ‘flag’ will succeed (with a push to new highs) or fail (under 1,600 targets a swift move back to 1,530).
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Corey Rosenbloom, CMT
Afraid to Trade.com
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