This week’s Strongerhead analysis special, I am sharing one of my favourite ‘horizontal line analysis’ using support and resistance. This is not an exercise to doubt the trend. It is merely a study of possibilities for opportunities.
Some characteristics to take note on the S&P chart since 1997:
1) Since 1997 on the S&P, rallies from 750 points to 1550 points take about 5 years (1997 – 2001; 2003 – 2008; 2009 – today). Are we near time for a pause?
2) The three rallies from 750 points towards 1550 points have met with resistance at around same the levels (marked by 3 horizontal blue lines and circles named R1, R2 an R3). At the right edge of the chart, is there a possibility that R3 would happen again?
Base on monthly chart of S&P and Dow (not showed), we are already in overbought zone. If the bulls have legs, RSI can hit above 85 (Currently, RSI is at 78).
Weekly charts show the trend is still going up. It should continue until otherwise. Ride the trend with protection gear.
Daily charts RSI show prices are in a steady up trend. Break down of RSI would means buying opportunity if weekly up trend stays in force.
VIX (fear index) monthly since 1997’s low might serve as a support if price continue to grind down further.
VIX weekly is in line with monthly, doing a slow grind downhill. But if RSI hits below 25, VIX might stretch its legs again as VIX has never liked to be below 25 in the last two years.
VIX daily MACDH suggests the bottom has not formed yet. But prices are in oversold zone. Possible bounced next week. Watch out for FOMC as reasons for market pull backs.
Summary:
Mid term view:
Trend is still UP. 17 weeks into the up leg. Long or stand aside.
Short term view:
Any pull back on the daily chart would be buying opportunity if weekly trend is in force.
Cheers
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NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice.
