S&P: The Week Ahead, Oct 23

[forexpros2]

The markets tested the 1100-1100 area this past week, and have so far failed to push above it. While Friday was a down day, the Thursday lows held and we saw strong buying into the close, showing traders are still reluctant to head into the weekend on the short side.

The trend is still higher, but the market is losing momentum. This has been apparent on the RSI for some time, but despite lower highs on the RSI the market has pushed higher overall, therefore a divergence is only worthwhile once we see a break in price. The divergence does signal a weakening and warrants some caution on the long side.

Friday's trading formed a bearish engulfing pattern on the daily chart, coupled with the fact it occurred at a pivotal resistance level, it does indicate a pullback. Again, price will need to confirm. A drop below 1073 (especially a daily close) would confirm at least a short term retracement.

A move below 1073 is likely to target 1050-1045. A drop below 1040 would break daily trendline support, but further support is likely by 1020. A drop below that level indicates a larger move down.

Since we are waiting for price to confirm, another move higher is still possible, but not as likely as a move lower. A move above 1102 will target 1111. A break above that will target 1125-1130.

Happy Trading,

Cory Mitchell, CMT
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Published by CFDsPros.com
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