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S&P 500 Technical Update: Trading Between the Lines

S&P 500 Technical Update: Trading Between the Lines

What’s inside:

  • The S&P 500 continues to be choppy, but with increasing daily ranges
  • Overall, price action is converging towards a move
  • Will continue to key in on key lines and levels until the market gives good directional indication

Price action remains choppy in the S&P 500, a theme which has been in place since July. If there is a silver lining, though, it’s the expansion in daily trading ranges we have seen since the fall trading season kicked off in early September. The 21-day average true range (ATR) is currently over 24 points compared to under 14 in the middle of August.

While the day-to-day ranges have widened, the lack of follow-through is leading to an overall convergence, which suggests we will see a sustainable move at some point in the not-too-distant future. The trend-line running off the 9/8 high and up from the 9/12 low are on path to soon meet. Until either of these break, though, we can continue to use them as levels of support and resistance to take fade trades should the S&P find buyers/sellers and turn away from these lines as they have been in recent trade.

Another line of importance comes in just below the longer trend-line, which has seen significant play since the middle of September, as we can see by the number of times the market has responded to this slope as support. A smaller, less significant trend-line off the 9/30 swing low will be keyed in on in the very near-term.

The market has been bouncing around between varying degrees of support and resistance in recent weeks, and looks likely to do so in the very immediate future, but to reiterate, the constricting trading range is likely to expand here shortly. For now, again, it will be best to keep trades limited to fades off support and resistance until we begin seeing an expansion in trend one way or another.

SPX500 - Hourly

Created in Tradingview

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---Written by Paul Robinson, Market Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.