S&P 500 Sideways, Choppy Price Action

S&P 500 has been moving sideways in a 100 point range for almost two months. This choppy market action in a narrow range has been the cause of severe problems to some trend followers. There are conflicting technical signs about the future direction of the market and a final resolution may take longer than some anticipate, unless fundamentals change drastically in favor of either bulls or bears.

The bear flag formation defined by trendline T1 and line L1 has a downside objective near 1010. A triple top near and below resistance at 1220 reinforces the bear view. At the same time however this bear formation is fought by a triple bottom near 1120 and an upward bias denoted by trendline T1. There is a battle taking place here but this is how the market operates.

The final winner of this battle will take time to emerge unless fundamentals change drastically soon. Choppiness may continue for several weeks giving more troubles to trend followers. I would turn off any automated trend following system at this point. There is no point in getting caught up in a fight of this kind. This is a good market only for experienced very short-term swing traders, scalpers and option sellers. Trend followers should take a break, in my opinion, until the technical picture is clarified.

Have a good trading day~

Charting program: Amibroker (Charts created with AmiBroker – advanced charting and technical analysis software. http://www.amibroker.com/”)

Disclosure: no relevant positions.

Disclaimer:The author is not a financial advisor and does not recommend the purchase of any security or advise on the suitability of any trade or investment in any timeframe. ETF, stock, futures, forex and options trading and investing involves substantial financial risks and can result in total loss of capital. If investment or other professional advice is required, a licensed professional should be consulted.

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