Chart of the Day – Good News and Bad News
In cases such as this, I find that Fibonacci retracement lines can act as a surprisingly predictive framework. Obviously that condition can’t last forever – eventually, the two sides will intersect (and squeeze the index or stock out of the range). As for a landing spot, that can be a little trickier to identify. More often than not an ascending wedge is a bearish development though…. When/if the S&P 500 closes under the lower support line – and I believe it will happen sooner than later – the outflow (and profit-taking begins). In short, each day that passes pushed the S&P 500 (and all the indices for that matter) closer to a fairly significant breakdown. The chart below says it all. Regardless, it means nothing until that lower blue line actually crumbles as support. The first one is at 940 right now, augmented by the fact that the 940-ish area was resistance back in May and June. It’s not a pefect target, but it’s a starting point until other clues materialize. I think I mentioned this a few days ago, but if not, the market continues to work its way into a dangerous situation. with the market inching the chart higher and higher, but only setting it up for a drop from a higher level. Prior support and resistance levels are always good place to look first, though there are so many with this chart, I doubt there are any that are particularly meaningful. The risk is definitely brewing though. Connect on Facebook | Follow on Twitter The trigger here is pretty simple. Technically speaking, the shape of the chart is called an ascending wedge. Don’t let the ‘ascending’ part fool you though…. S&P 500 - 10/26/09
FreeTradePicks.com | Login | Get all our email updates here! it’s not a bullish scenario when it’s all said and done. And, given how overnough charts can get when subject to this shape, the drops can be fast and far. The shape is formed when an index or stocck is framed by a rising support line and a rising resistance line, but with the resistance line not moving as steeply as the support side of the range.