DETERMINING THE S&P 500'S REAL OVERHEAD RESISTANCE
- Chart #1 is how many are looking at the current S&P 500's overhead resistance,
- The conclusion from this chart is that is has found resistance four times since October's initial weakness at the same point - and failed each time,
- The logical conclusion is that is will find support at a similar lower level that has held previously.
- The problem with this analysis is it is too short term in nature.
- Chart #2 is a similar approach but gas added simple moving averages (20, 50 & 200),
- The moving averages suggest that since the 20 SMA has turned up and the 200 SMA appears to be adding support that after a further near term consolidation, the market will break the previous 4 overhead resistance points.
- Again, the problem with this analysis is it is too short term in nature as well as the particular SMA's used.
- Chart #3 goes all the way back to the 2008 Financial Crisis and the 2008 market lows,
- This analysis suggests that we have simply experienced an expected consolidation before likely heading higher.
- The problem here is that the recent correction didn't touch the linear trend support line as well as appearing as though the market may be starting to go parabolic.
- A better way to consider Chart #3 is shown in Chart #4 where we are using a log scale,,
- Here we see a classic textbook underside resistance test,
- We are getting closer to the right way to look at overhead resistance.
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