While we continue to remain mired in the middle of a broad bear flag in the markets, each week that we hold the lows of this channel is a positive step towards building a viable base. We closed green each day this week, and now find ourselves yet again at the upper levels of our recent range. We have multiple levels of overhead supply and are likely to stall out as we begin to probe these resistance areas.
Looking at a chart of the SPDRs S&P 500 trust etf, we can see that we are now approaching a descending 50 day moving average as well as some topping candles we formed just under $124 a couple of weeks ago.
While this area now becomes a critical level for the bulls to overcome, the real battle will be on holding the now rising 20 day moving average in the likely event that we are held in check at these levels. If we blow past these levels, look at $126 to serve as stiff resistance as this was the bottom of the head and shoulders pattern we broke down from in early August. If we pull back and cannot hold our 20 day moving average, look for a retest and probable probe below the bottom of our rising channel.
As I mentioned for the last several weeks, we remain in a poor swing trading environment and traders should continue to take very quick trades as we oscillate between the extremeties of our trading range.
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