S&P 500 – Stuck Between Triple Top and Triple Bottom – What’s Next?

Since the middle of February the S&P 500 has been stuck between two long-term trend channels, one acting as resistance, one as support. The chart now shows a possible triple bottom or triple top. Which one is it?

Was today’s new S&P 500 all-time high another fake out breakout?

I don’t have a crystal ball, but I can lend you my flashlight for a moment.

A flashlight doesn’t tell anyone what’s happening next, but it sheds light on issues invisible without a light. That’s exactly what the two charts below will do.

Long-Term ‘Flashlight’

The weekly S&P 500 bar chart goes back to March 2009, the beginning of this QE bull market, and shows two long-term trend channels. The black channel started in March 2009, the blue channel in October 2011.

Since the middle of February, the S&P 500 has been wedged between both channels.

The March 5 Profit Radar Report highlighted the blue channel and noted that: “In times past, this channel has caused at least a short pullback.”

On March 6 and 7 the S&P 500 hit the blue channel, but couldn’t break above it, which indicated (along with a weekly MACD failure) that the S&P didn’t have the escape velocity needed to break out.

While the blue channel acted as resistance, the black channel acted as support. In fact, there were many other support levels that confirmed the black channel support, that’s why the March 23 Profit Radar Report referred to: “a cluster of support levels around 1,840 – 1,830.”

Short-Term ‘Flashlight’

The second S&P 500 (NYSEArca: SPY) chart zooms in on the daily action and shows two additional support (green line) and resistance (red line) levels.

There’s a good chance that we’ll see another fake breakout, such as on March 21 (red arrow), when the S&P 500 rallied to a new all-time high (keep in mind that the red line wasn’t available on March 21 yet).

A special early morning March 21 Profit Radar Report warned that: “There is at least one Elliott Wave count allowing for a fake out break out and the week after Triple Witching ended with a loss 14 out of 21 years.”

This market is very tricky and more than ever is intent on separating as many investors as possible from their hard earned dollars. Discipline and risk management are a must.

The latest Profit Radar Report features a full April forecast and identified the buy trigger, that – once broken – will lead to higher prices (although any long position will be kept on a short leash).

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

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