A Classic Pattern
Today (Tuesday) we saw a modest break of the upper trend line, followed by a simple rounded top pull-back pattern. This indicates modest weakness coming in at the end of the session; and we will likely see a pull-back to the upper trend line, followed by a renewed push to the upside as marked in the 39 Minute Chart. Watch for this turn after the Open for new Long positions.
The Daily Chart clearly shows the narrow consolidation as well, suggesting a continuation move to 27,600 this week. In the absence of additional negative news, we could then break the wide range and move on to 29,500. It’s difficult to imagine it can do that in this uncertain market, it clearly is still striving to move upward.
We have been talking about the array of negative forces at play, including reductions in earnings, continued business failures, enormous new federal debt, uncertainty around the coronavirus, and the US-China relationship, just to name a few! In the end, the mantra “Don’t fight the Fed” is operative. I think it could easily fuel a rally going into November. But with all the uncertainty that exists, we can expect extreme volatility in coming months, even though recent days have been eerily quiet – the calm before the storm. As the coming moves play out, market participants will be watching support/resistance levels – and reacting to them.