Failing At Strong Resistance

The main resistance for the downtrend on SPX since the all time high is twofold, and those two resistance levels are currently crossing.

The first level is the monthly middle band, which has a long track record of acting as main support in an uptrend, and main resistance in a downtrend. That is currently at 4173 and the high this week was at 4169, so that was an almost perfect test.

The second level is the trendline from the 2009 low that was resistance in 2010, then resistance for multiple tests in 2012-14, 2018 & 2020 until it was broken hard in the collapse upwards after the 2020 low. After that was broken as support last year it has held as resistance twice, and has seen a third test this week that has held perfectly so far.

Both of these resistance levels are very strong, and in combination even more so. A break and conversion of these levels would open a possible retest of the all time high, but there's no obvious reason to look for that here yet, so the obvious lean here is to expect a fail and the possible start of a new leg down into a new bear market low.

SPX monthly chart:

On the daily chart an RSI 5 sell signal has fixed, and these are good indicators that SPX is in a topping process. On the chart below there have been 13 of these, and nine of them made target. Since the all time high, three out of four have made target.

I would note that there is still an open H&S target on this chart in the 3400 area. As that would be a backtest of broken resistance at the early 2020 all time high, that is a very attractive target. This turn could be the start of a move to reach that target, potentially making the second low of a high quality double bottom there.

SPX daily chart:

On the ES and SPX charts high quality rising wedges have formed from the early March low. These are the kind of patterns seen before a significant retracement and often a significant high or low. Rising wedge support on ES held yesterday and then broke shortly after the open this morning, and that has since been confirmed with a break below the SPX rising wedge support trendline which also held at the low yesterday and broke this morning shortly after the support break on ES.

ES/SPX have likely either topped short term or are in a topping process. That may need a retest of the high this week to make the second high of a small double top, but if not, I'll be watching the possible H&S neckline in the 4095-4100 as the obvious next support.

ES Jun 60min chart:

The trendlines on SPX aren't quite the same, but the overall setup is essentially identical. The possible H&S necklines on SPX are in the 4088 or (better) 4070 areas.

SPX 15min chart:

The obvious first decent short term support is at the daily middle band, currently at 4083, that's a decent match with both possible H&S necklines of course.

SPX daily BBs chart:

Overall I am expecting to see at least a decent retracement here in the near future, and this may be the start of a move down into a new bear market low. If seen, that could set up a double bottom on SPX that could end this bear market and light the path to a retest of the all time high.

We did our monthly free public big five and key sectors webinar at theartofchart.net yesterday, and if you'd like to see that you can see it here, or on our April Free Webinars page. Everyone have a great weekend :-)

If you are enjoying my analysis and would like to see it every day at theartofchart.net, which I co-founded in 2015, you can register for a 30 day free trial here. It is included in the Daily Video Service, which in turn is included in the Triple Play Service.