Stock Market Trading Ranges
The stock markets recovered from an early session downward trend to end slightly positive at close. It is becoming hard for a trend to stabilize in either direction. While the markets are in a strong bearish trend, they also seem to be quite oversold. To a point where there could be a huge upswing with potentially strong momentum if there is any good news on the inflation or interest rate front.
In this market scenario it is important to identify as closely as possible the trading range of the market for 2 reasons:
Potentially trade this trading range
Identify a breakout in either direction
So, I am going to try and do this.
S&P 500
The above is a 6-month chart of the S&P 500. The price touched a low of 3636.87 on June 17. The resistance level is 3835.58. The close today was at 3831.39. So, the market either crosses over the resistance level or falls back to its recent low. So
Range 1: between 3636.87 - 3835.58 (current level is 3831.39)
Note that the S&P 500 has tried to break through that resistance level of 3835.58 the last 4 trading days and not succeeded. The last 2 days it has come the closest and seems like with some momentum it could break through. But we have to wait and see.
The next resistance level is at 4077. Also, between the 3835 and 4077 there is a line I have drawn that is at around 3975. This hand-drawn line is the slope at which the price has stalled 3 times in the last 6 months. So, this could be another resistance level.
Range 2: between 3835 - 3975
Range 3: between 3975 - 4077
These are all trading ranges per my system. The price has to cross the 4077 level to be out of any nearby short-term resistance.
NASDAQ
The NASDAQ actually pushed through its first resistance level today by closing at 11322. The resistance was at 11129.
Interestingly it is close to crossing over the slope (hand-drawn) that touch the points at which the price movement upward had stalled over the last 6 months. Let’s call that level 11300.
Range 1: between 11300 - 12487 (which is the level of the next resistance)
Range 2: between 12487 - 13027 (the next resistance level)
Note that with the big move today, the NASDAQ actually crossed over the 20-day moving average as well. That happens to be an indicator that I track closely as well. So, the NASDAQ strength is telling me markets may be finally ready for a bounce back. Whether that bounce can be sustained or not, we will have to wait and watch. But there is strength.