S&P 500 IndexShort
SPX Breaks Symmetrical Triangle Consolidation Pattern
Updated
Primary Chart: SPX Symmetrical Triangle and Anchored VWAPs
The S&P 500 broke out of a symmetrical triangle pattern this week. On September 13, 2022, SPX's price closed below the lower trendline of the triangle, which is an upward trendline from the June 17, 2022, low. These multi-month patterns do not resolve easily every time. A backtest of the trendline that was violated commonly occurs, though it's not a certainty. A backtest in this case could mean price moves up to test the SPX 3930 to 3941 zone in the next several days, if it occurs at all.
Two anchored VWAPs are shown on the Primary Chart above. First, the anchored VWAP from the all-time high on January 4, 2022. Price moved above this level in mid-August 2022 at the end of the summer rally. But price quickly failed back below this anchored VWAP not long after the breakout. This constitutes a failed breakout, which has bearish implications for the near term outlook.
The Primary Chart also shows a VWAP anchored to the June 2022 lows. SPX's price broke above this VWAP at least three times on the daily chart, but each breakout has failed. This also has bearish implications in the near term.
The levels that matter the most right now are the symmetrical triangle's two trendlines. As long as price stays below the lower trendline of the triangle (an upward trendline from June's low), the technicals favor a continued bearish outlook. But there are some other levels that are important to watch as well. For next week, all the key SPX price levels to watch are identified below. Key resistance levels for next week include the following levels:
Lastly, the next major levels for the bears to conquer should be the VWAP anchored to the pandemic-crash low in March 2020. Look where SPX's price closed on Friday, September 16, 2022, just above this VWAP after a brief break below it:
Supplementary Chart A: Anchored VWAP from March 2020 low
Supplementary Chart B: Fibonacci Levels from June to August Rally and Early September Rally
The S&P 500 broke out of a symmetrical triangle pattern this week. On September 13, 2022, SPX's price closed below the lower trendline of the triangle, which is an upward trendline from the June 17, 2022, low. These multi-month patterns do not resolve easily every time. A backtest of the trendline that was violated commonly occurs, though it's not a certainty. A backtest in this case could mean price moves up to test the SPX 3930 to 3941 zone in the next several days, if it occurs at all.
Two anchored VWAPs are shown on the Primary Chart above. First, the anchored VWAP from the all-time high on January 4, 2022. Price moved above this level in mid-August 2022 at the end of the summer rally. But price quickly failed back below this anchored VWAP not long after the breakout. This constitutes a failed breakout, which has bearish implications for the near term outlook.
The Primary Chart also shows a VWAP anchored to the June 2022 lows. SPX's price broke above this VWAP at least three times on the daily chart, but each breakout has failed. This also has bearish implications in the near term.
The levels that matter the most right now are the symmetrical triangle's two trendlines. As long as price stays below the lower trendline of the triangle (an upward trendline from June's low), the technicals favor a continued bearish outlook. But there are some other levels that are important to watch as well. For next week, all the key SPX price levels to watch are identified below. Key resistance levels for next week include the following levels:
- 3980 = two key Fibonacci levels coincide here (a .50 retracement of the two-month summer 2022 rally and the .618 retracement of the early September rally)
- 3978 = anchored VWAP from June 17, 2022, low
- 3959-3961 = highs from last week's two-day consolidation, September 14-15, 2022
- 3927-3944 = upward trendline from June 2022 lows that is now resistance (previously support)
- 3899/3900 = major resistance from June and July as well as the .618 retracement of the summer rally
- 3886-3888 = important lows from the first half of September 2022
Key support levels for next week include the following: - 3858 = anchored VWAP from March 2020 pandemic lows
- 3837 = low from OPEX / quad witching on September 16, 2022
- 3812 = 1.272 extension of the retracements of the early September 2022 rally
- 3783 = .786 retracement of the two-month summer 2022 rally
- 3721 = 1.618 extension of the two-month summer 2022 rally
- 3636 = the YTD SPX low
Lastly, the next major levels for the bears to conquer should be the VWAP anchored to the pandemic-crash low in March 2020. Look where SPX's price closed on Friday, September 16, 2022, just above this VWAP after a brief break below it:
Supplementary Chart A: Anchored VWAP from March 2020 low
Supplementary Chart B: Fibonacci Levels from June to August Rally and Early September Rally
Note
The levels to watch remain the same, though price appears to be rallying up to backtest a couple of key prior supports that are now resistance. SPX 3900/3899 is the .618 level being tested as of the close on 9/19/22 and SPX 3933-3935 is where the triangle pattern's lower uptrend line lies now as resistance—watching for a backtest there and to see how price responds to the backtest. FOMC presser Wednesday will likely be the catalyst for the next trend move, but watch out for a fake out move before the real one.
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