The S&P 500 Index ($SPX) has been trending steadily higher since 1,040, rallying over 100 points in the last four weeks. However, price is beginning to show signs of weakness, which could lead to a near-term retracement soon. Here’s my outlook for the week..
Outside Reversal
Two sessions ago, price formed an Outside Reversal candlestick pattern, which is a highly predictive pattern for calling reversals. Essentially, price tested the waters above 1,150 and wasn’t able to find buyers. When no buyers were found, sellers entered the market and pushed price lower the rest of the session.
This candlestick pattern could offer an indication into future price movement. If buyers did not enter above 1,150, price must drop in order to find buyers. A drop back to prior resistance at 1,128.75 could fit the bill, but a move to 1,103 to 1,112 could also occur.
Inside Day Relationship
The $SPX has also formed another Inside Day relationship, which can offer excellent breakout opportunities. A breakout from Friday’s range (1,151 and 1,139) could spark the next 3- to 5-day move in this index. Watch this range closely.
Golden Pivot Zone
For those of you that have bought my book, Secrets of a Pivot Boss, you know that the Golden Pivot Zone (GPZ) is one of the most powerful pivot combinations in technical analysis.
A bullish GPZ has formed for the month of October. During a bullish trend, you will usually see price test the GPZ before moving higher. However, since price hasn’t retraced yet, we will be using the GPZ as a near-term target for the potential retracement. Since the GPZ spans from 1,103 to 1,128.75, look for price to drop in this range some time this week. Although, the center of the range usually offers the best zone to watch for a test (from 1,111 to 1,116).
If this range successfully withstands the retracement, we could see another round of buying to new highs during the current price run.
Let’s see how this plays out!
Cheers!
Frank Ochoa
PivotBoss.com
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