We introduced the hourly chart of the S&P-500, which is showing a rising channel, as the current Chart In Focus, yesterday. The channel hasn't been broken as yet, but we'd be quite surprised if it didn't do so soon.
It certainly would be a surprise if the breakout is actually the upside, but with the multitude of gaps below, surely - one would imagine - a break of the lower line of the rising channel is on the cards at some point.
S&P-500 hourly chart featuring rising channel and gaps
As the chart shows, after having hit the upper end of the channel at the close on Wednesday, the index did not end up declining to the lower end. Instead, it consolidated and that allowed the upper channel line time to move further northward and, by the end of Thursday, the upper line had risen 5 points. Having consolidated at levels slightly below Wednesday's closing for most of the day, the index climbed a few points to new highs in the last two hours, closing Thursday with a 4.5-pt gain.
At the end of that session, RSI is in highly overbought territory and there is a negative divergence on MACD. Each of them bring about the possibility of a short-term reversal. Assuming a small drop on Friday, the big question will then be what will happen if/when the index hits the lower line of the channel.
The lower line will intersect at around 1084+ today. That means that if the index drops 12 points from Thursday's close (or less, if it is later in the day), the lower channel line will be challenged. Traders will want to keep a close eye on the action at that point. As we'd mentioned yesterday, we'd be on the lookout for a bearish reversal on the minor trend that goes on to fill at least a couple, if not all four, of the recent gaps, within a week or two.
« Rising Channel on S&P-500 Hourly Chart (2) »
We introduced the hourly chart of the S&P-500, which is showing a rising channel, as the current Chart In Focus, yesterday. The channel hasn't been broken as yet, but we'd be quite surprised if it didn't do so soon.
It certainly would be a surprise if the breakout is actually the upside, but with the multitude of gaps below, surely - one would imagine - a break of the lower line of the rising channel is on the cards at some point.
As the chart shows, after having hit the upper end of the channel at the close on Wednesday, the index did not end up declining to the lower end. Instead, it consolidated and that allowed the upper channel line time to move further northward and, by the end of Thursday, the upper line had risen 5 points. Having consolidated at levels slightly below Wednesday's closing for most of the day, the index climbed a few points to new highs in the last two hours, closing Thursday with a 4.5-pt gain.
At the end of that session, RSI is in highly overbought territory and there is a negative divergence on MACD. Each of them bring about the possibility of a short-term reversal. Assuming a small drop on Friday, the big question will then be what will happen if/when the index hits the lower line of the channel.
The lower line will intersect at around 1084+ today. That means that if the index drops 12 points from Thursday's close (or less, if it is later in the day), the lower channel line will be challenged. Traders will want to keep a close eye on the action at that point. As we'd mentioned yesterday, we'd be on the lookout for a bearish reversal on the minor trend that goes on to fill at least a couple, if not all four, of the recent gaps, within a week or two.