SPX S&P 500 Daily Chart 'W' Pattern Gaps

There is a lot going on in this spaghetti chart a daily look at the S&P 500. Starting with the blue W pattern bottom, price broke out yesterday which opens the door to the upside target at 2056. Call the base of the W at 1830 ignoring the spike lows, and the breakout line is at the strong support/resistance level at 1942-1943, that is 113 handles difference which targets 2056 (1943+113). A W pattern bottom is one of the strongest chart patterns for a bullish rally. If the W is under both the 50-day and 200-day MA this is typically an extremely strong upside pattern.

The very strong and key S/R is 2061, 2046, 2040, 2032, 2023, 2019, 2011, 2002, 1985-1988, 1978, 1973, 1965, 1961, 1951, 1942-1943, 1924, 1897, 1884, 1878, 1874, 1872 and 1848.

The 50-day MA is 1952 and falling is so close that you would think that price wants to at least tap it to say hello. Price violated the lower standard deviation line (pink) seven days ago so the middle and perhaps upper band are on the table. The SPX immediately spikes up to the middle band, which is also the 20-day MA at 1895, and kept on going. Price is in the neighborhood of the upper band at 1960 so it would be prudent to say hello to that level. If the upper band is violated, the SPX will want to move back down to the middle band.

There are four gaps that need filled up above due to the drastic crash in stocks to begin the year. The upper gap is 2065-2070-ish and everything else is buttoned-up above that. So the SPX may desire to fill those gaps and close up all loose ends up top and then begin falling and crashing in earnest again. Interestingly, the W pattern upside target at 2056 is in the neighborhood of the topside gap so 2056-2070 may be an ultimate goal for the SPX during the next few weeks.

The indicators are long and strong (green lines) so higher highs in price are desired after any pullbacks should occur. The stochatics are overbot and the money flow is negatively diverged over the last three days so these two may create temporary weakness in stocks. S&P futures are marginally lower this morning as this missive is typed. The indicators point to higher highs for the days ahead but it is never in a straight line, there would be fits and starts. The 1942-1943 support is uber strong so price will likely back kiss this level a time or two to make sure it has the stones to move higher, otherwise price will collapse from 1942 and seek the 1924 support.

The ADX shows that the downward trend in stocks ongoing since late 2015 is a strong trend downwards (pink box). The black ADX line, however, is dropping and now at 27.50. If the ADX line drops under 25-ish the downtrend in the stock market is over. Stocks would likely then spend a month or three staggering sideways and resetting to decide on the future path. Note the strong uptrend in September verified by the ADX above 25 but in October the strong uptrend was toast; stocks topped out at Halloween and are lower ever since. If you have large short positions on the market you want to worry if you see the ADX dropping under 25 and down to 20 since stocks are going to float higher.

Use the key 1942-1943 support as a guide going forward. Bulls win big above 1943. Bears win big under 1942. Key resistance above is 1951-1952 (confluence of the 50-day MA at 1952 and price resistance) and 1960-1961 (confluence of the upper standard deviation band and price resistance). For the bears, if 1942 fails, price will want to return to 1924 for a test of support. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 5:41 AM EST: The SPX loses the 1942 support and plummets to the 1924 support discussed above. Price staggered along the important 1924 level all day long breaking lower at the closing bell ending at 1921. Detailed support/resistance levels in this area are; 1942-1943, 1936-1937, 1928, 1924, 1920, 1917, 1912, 1901, 1897. With the 1924 ruptured, price would like to test the 1897 support but may bounce before then from one of the other support levels. The low CPCE put/call ratio representing complacency and a near-term market top comes to be.