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 October 2018, I concluded with these statements:
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.
According to the chart above, the SP500 then proceeded to drop sharply, as anticipated.
The market found support at the 2600 level (the highest of the three support lines drawn in the chart on the right) and has since rallied to the 2800 level, which is the lowest of the four resistances displayed.
This suggests that the sideway action is intact, as the previous post predicted..
If the sideway scenario is to hold, we can expect the market to trade back and forth between the three lower supports and the four higher resistances. This will occur until a new force breaks this sideway pattern, either by breaking out above the highest of the four resistances, or by breaking out below the lowest of the three supports.
A sustained upside break will imply a bullish trend continuation for the yearly timeframe.
A sustained downside break will imply a bearish change in the trend of the yearly timeframe, seen in the chart on the left.
We will have to carefully observe what the market does at the higher resistances, and at the lower supports. Then we can trade what we see at the relevant time.
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About the Author
Jeffery Tie lectures on Trading and Technical Analysis for AB Maximus & Co and the SGX Academy. He was previously from Kim Eng Securities, Refco Singapore, and CMC Markets. He is a registered instructor with the International Shinkendo Federation, and the author of Aiki Trading: The Art of Trading in Harmony with the Markets.