This is a busy week. Trump has declared a peaceful truce with North Korea and is on to bring China into the fold. The FOMC meets Tuesday and Wednesday and is expected to raise interest rates again. And the S&P 500 is sitting at very important price levels. Will the index join the Russell 200 and Nasdaq 100 as they plow to new highs? Or will it reverse and confound market participants yet again. Either way it is the time for action.
The chart below looks at what might be brewing in the S&P 500. Using Renko blocks to smooth out some very short term volatility gives a bit more clarity. These blocks form when the S&P 500 moves more that its 14 day Average True Range. So when a material price move occurs a block prints. The chart shows the move from a 2011 low to the consolidation from late 2014 until the start of 2016. You then see an equal move higher to the top in January. There has been consolidation since.
Coming into these historic events the S&P 500 is at the top of the consolidation. A break higher would give a target on a Measured Move to 3600. That is a long way off. But what makes this chart intriguing as the S&P 500 touches the top this time compared to the last two touches at the top is that momentum is building, not waning. The RSI has been rising since it pushed off of the bottom. And the MACD has done the same. But the MACD has also crossed up, a buy signal, and turned back positive.
I can’t tell you exactly what will happen. But it appears that the S&P 500 is just waiting for these catalysts to pass before pushing higher out of consolidation. Get the popcorn ready boys and girls it could get exciting soon.
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