A couple of days ago, concerned about the reversal pattern on the S&P 500, I drew 2 support lines and a resistance line at the top. The first support is at 2060. The 2nd one, because it was a more critical longer-term support going back to March, I displayed its value of 2015.
Yesterday morning, we watched the first support become breached in pre-market trading around 9 AM. You can see how clearly the S&P recognizes this line, as it bounces back against it as its new resistance. It then pops it, giving hope to the bulls, only to come back down one last time before beginning its trail towards the next more significant support.
You can see that today, the 2015 support was repeatedly tested during the last 2 hours of regular trading hours (RTH), each time with a lower high. This is a clear sign the support is about to be breached. Then, the bell rang with the bulls able to take a sigh of relief that they protected the flag.
The bulls were too quick to celebrate the end of the week, though. Just as the first support was violated in yesterday’s pre-market trading, the bears took advantage of the extra hour of futures trading. The breach of the critical support occurred in the /ESZ5 at 4:50 PM.
While the bulls ran to the pub at 4pm to celebrate protecting the 2nd support and begin the weekend, the bears hung around to win this week’s round and position the S&P for a very bearish looking time.