« Rising Channel on S&P-500 Hourly Chart »

Yesterday, in the posting titled "S&P-500 Set to Make New Minor Trend Highs, But...," we spoke about an apparent rising channel and a handful of troublesome gaps, on the hourly chart of the S&P-500.

Today, the chart becomes our current 'chart in focus' because the index stopped exactly at the upper line yesterday and if resistance is met with at the top end of the channel, there could be a testing of the channel support line soon. Traders will want to focus their attention on the support line if/when prices reach that level (1078 and rising, at this point). A break of said line would be the first sign that the index is ready for another small correction (at least).

S&P-500 hourly chart featuring rising channel and gaps

We also spoke about gaps in yesterday's intraday market commentary article. Yet another gap was left on the charts at the open yesterday. This is just a 'no can do,' as far as we are concerned. The leaving of three unfilled gaps (as shown on chart) in the last three days is just not healthful for the markets. Rarely just SPX leave such a sequence of gaps without going on to fill them in the coming weeks. We're not ready to throw the kitchen sink into the short side right away (there arent' sell signals on the daily charts, which is what we swing traders put most focus on, as yet) but it is certainly the time to consider taking on some portfolio protection or keeping portfolio exposure on the bullish side at a manageable level.

If the lower channel line is broken in a sustained manner, we'd be on the lookout for a move to at least the 1040-level, where the first of the gaps in the sequence is located. In fact, we would not be extremely surprised to see even the gap left on September 8th (not seen on this chart) at around 1015 be filled as well. In any case, let's take first things first. If the lower line does not break, all these projections are moot.

In addition to the aformentioned reasons for a correction on the intraday charts, the fact that RSI is back in overbought territory and the fact that MACD is arguable showing a bit of a negative divergence, also adds to the possibility of a bearish reversal. Stay tuned; we'll follow these developments closely over the coming sessions.