Our expert, Jeffrey Tie, takes you through a step-by-step analysis of two S&P500 charts to see how you can make investment decisions by analysing trends from the market’s current resistance zone.
Technical View, S&P500 cash index. Image: Jeffery Tie
In my previous write up on the SP500 in August 2018, I concluded with these statements:
A strong daily bearish candle accompanied by a strong bearish weekly candle, will suggest the sideway red continuation. Should the market elect this scenario, then holding long positions near resistance will be a painful experience as the market then trades towards sideway support.
A strong daily bullish candle, accompanied by a strong weekly bullish candle closing significantly above the Jan 2018 resistance will suggest bullish trend continuation on the green swing. Should the market elect this scenario, then it will not be wise to sell and then regret as the long term green swing moves higher up.
Yes, the SP500 did break above the Jan 2018 high, but the up swings in blue displayed weakness, as the size and magnitude of the up swings diminished. This indicated that buyers were not truly committed.
The first indication of the sideway market scenario was when the SP500 index closed below the dotted blue trendline.
Subsequently, on Oct 10 2018, sellers dominated, and the market strongly closed below the dashed blue trendline, with a daily range that recorded exceptional selling strength. This implies that the sideway scenario is now highly probable.
In addition, should sellers dominate below the 2532 red swing low, we can anticipate a change in the trend of the higher timeframe black and green swings. This will mean that the monthly timeframe red swings should then trade in a down trend pattern of lower highs and lower lows.
Holding long positions at this time may not be the wisest course of action.
Trade well, and be safe in these very interesting times!
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About the Author
Jeffery Tie lectures on Trading for AB Maximus & Co. He was previously from Refco Singapore and CMC markets. He is also a registered instructor with the International Shinkendo Federation and previously wrote a 3-part article on the similarities between the philosophies of Martial Arts and Trading for Chartpoint Magazine.