A broad look at the S&P Market status

Slope of Hope is fast becoming one of my MUST-HAVES and that sentiment is a function of all the fabulous posters that this site has. I like their approach to discussing market conditions. They are generally an easy read. And to me, they make sense, and that what makes a difference to me.

As so many other have said, caution is in order.

Food For Thought Going Into The Weekend (by Drew)

Hey all, Drew here from Tilt. Sorry its been so long, had a lot on my plate the last couple of weeks. Not that I missed much action anyways, we are virtually unchanged since November 9th. Anyways the tape has been crazy all week, culminating in an absolutely wild session on Friday.

Lets step back and see how it looks within the broader trend.

First off, when the market enters wide trading ranges, I find it best to use line charts in order to better filter out the noise. Line charts can be beneficial in this case, because they only focus on closing prices. Candle charts have their advantages at times, but can be very difficult to utilize when the tape gets crazy.

The 60-minute S&P 500 chart below shows a clear trading range about 25 points wide, between 1086 and 1111. We know that their is still some buying pressure out there, as we have pushed through the top of the range about three times in the past week. Although today's breakout and reversal was somewhat alarming, it is critical to point out that mid-channel support did not break. In addition, we may have put in a potentially higher short-term low, with 1100 as key support. This level was tested twice during Friday's high volume session, and ultimately held put.

Remember though, we are still within a trading range so wait for a decisive breakout before committing new capital. Although candlestick charts and patterns can be beneficial, these patterns have limited reliability and they are far from infallible. As an example, it is important to remember that a key reversal bar does not always follow-through with a reversal of trend. Once again these signals can fail. So...the million dollar question is, do we close higher or lower next week?