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As I discussed last night in Trading for Fun & Profits, the market is at another critical turning point. After topping many levels of resistance, SPX is nearing some of the most important. A break above can usher in much higher prices, while a reversal here could do a lot of damage.
It’s no wonder that the market has bounced back and forth in a fairly tight trading range for the past week. We’re likely to see more whipsawing over the next couple of days. So, those who like to remain above the fray could wait for a break above 1603 or below 1580 and not miss too much of the action.
AAPL is getting a lot of attention for its “breakout.” Recall when we last charted AAPL [see: Is It Safe?] on April 19, we noted the presence of a channel line that should support a rebound.
“the chart patterns and the harmonic patterns that suggest AAPL is due for a substantial bounce. Whether it turns into something more than that will depend on whether it break free of the falling channel from hell… AAPL should find support at the .75 line of the white channel around 380-385.”
I was a little off, as the actual bottom was 385.10. But, it’s back to that channel bound discussed and is thinking about breaking free. Unfortunately, it’s also reached a .618 Fib line that could spoil all the fun.
UPDATE: 10:40 AM
SPX is getting a bounce off its lows of this morning. It should run its course by 1592. Any higher would be cause for considering switching sides.
An update on the bounce…
more in a few…
UPDATE: 11:50 AM
The IH&S neckline is currently up at 1599.63, and the channel midline is around 1598.26. Look for a backtest of the broken TL.
- TL (red, dashed) from 2000 and 2007 tops: 1593.44
- previous high: 1597.35
- purple channel midline: 1597.48
- the neckline of the almost completed IHS (yellow) at 1599.82
- TL (yellow, dashed) from 1994 and 2003 lows: 1600.22
It was that last TL that stopped SPX on the 11th, so that’s the most important. Topping it means exceeding the other three, so it’s obviously bullish.
And, as we discussed late yesterday, the failure to tag the IH&S neckline — now at 1599.82 — could be quite significant.
If the current backtest of the red 2000-2007 TL holds at 1593.40 or so, there’s another little IH&S waiting to complete at 1595.75 that targets 1604.53.
But, there’s a significant point of confusion coming up that I’m sure the market makers will take advantage of.
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