If you only looked at charts of the major indexes, and paid no attention to the calendar or the temperature outside, you could probably tell it's June. Corrective, risk-off, price action seems to be the order of the day. What follows is a look at the intermediate term support levels for the Russell 2000 and the S&P 500.
(if you would like to better understand the type of support and resistance analysis shown in this blog see the VBSR QuickStart chart.)
Above, the 3 day chart of the Russell 2000 index shows that price has sold off near to lower N band support. Support begins 1 ATR(40) above the lower N Band. The Russell is closer to support than larger cap indexes.
Let's switch to a weekly chart view of the S&P 500 index. Here it's clear that the index price is on a collision path with N band support. When that happens price generally pauses for two to five bars. This sets up a support zone from 1250 to 1225.
The same 3 day view of the S&P 500 index shows a similar support picture. The weekly and 3 day time frames concur on a support zone. Note that the peak of this 3 day N band is forming at 1224, and usually serves as the strongest forward support projection. The combined analysis of both timeframes indicates a support zone for the S&P of 1243 to 1224.
Also note that all timeframes indicate oversold market conditions. Therefore some bounce action is not unexpected. Also note that a few closes below 1224 would cause me to consider that the intermediate direction will continue as bearish.
Can anyone add to this analysis?
Kirk Northington
Northington Trading, LLC
www.metaswing.com
kirk@metaswing.com
Twitter: @kirknorthington
author: Volatility-Based Technical Analysis, John Wiley & Sons