Stock Market Update: Bullish Pattern in Downtrend

These markets continue to have unbelievable moves each day.  The S&P 500 re-tested the “flash crash” lows on Thursday and Friday, and after breaking below rallied back higher.

Last weeks analysis is still in play.  At the moment I don’t think there is much reason to be buying this market unless someone is unleveraged and buying for the very long term.  Current trend is down and for individual traders there is no point in fighting that.    Short-term traders that remain nimble in their position size likely continue to have a field day both long and short as the intra-day trends can be large in either direction.

Friday’s action does deserve a second look though; down aggressively early in the session and then very strong into the close.  We finished just below the half way point of Thursday’s action.  While it is not quite technically a Piercing Pattern (see: CandleStick Trading For Maximum Profits), Friday did significantly “pierce” into Thursday’s big slide.  This is a bullish pattern but while it may push prices higher early in the week, ultimately we need more confirmation than this to get bullish over the longer term.

Levels to watch at the start of the week include the Friday low at 1056  - a drop below will likely see further selling.

A rise above 1092 is likely to test the Thursday high around 1108.

Beyond these levels we are into the other support/resistance levels shown on the chart; all these points can be used as trading pivots.  Chart is below.

Cheers,

Cory Mitchell, CMT

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S&P 500 Daily