S&P 500 Reclaims the Trend Line
The S&P 500 broke a 10-month uptrend about seven weeks ago. Now it may be trying to reclaim that line.
This chart updates some patterns from our September 24 idea. The rising wedge pattern was bearish at the time – not a surprise given fears about inflation, the delta variant and a tapering Fed. But those forces have played out and investors are more focused on strong earnings and the improving economy.
Speaking of the economy, a key sector that tracks the business cycle just broke out:
Transports. The 
Avis Budget short squeeze may have triggered the last surge, but other parts of the index like railroads and truckers were already rallying. This provides potential “Dow Theory” confirmation to the broader market’s new highs.
Returning to SPX, another interesting chart pattern is the price action in late October. Notice how quickly pullbacks were bought on October 22 and 27. These bounces also occurred near the September peaks, which suggests old resistance became new support.
Finally, consider VIX’s close at 15.09 yesterday – its third lowest close since coronavirus slammed the market in late February 2020. Also notice its lower high and quick rejection around 17 this week. This key metric refused to “return to normal” during the entire pandemic. But now that the Fed is tapering, it may be time for the
fear index to get less fearful.
If that does happen, it could instill more confidence and spur more risk taking. So while the market has run a lot and bounced sharply, there may still be reasons to think the move will continue.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
This chart updates some patterns from our September 24 idea. The rising wedge pattern was bearish at the time – not a surprise given fears about inflation, the delta variant and a tapering Fed. But those forces have played out and investors are more focused on strong earnings and the improving economy.
Speaking of the economy, a key sector that tracks the business cycle just broke out:
Transports. The Avis Budget short squeeze may have triggered the last surge, but other parts of the index like railroads and truckers were already rallying. This provides potential “Dow Theory” confirmation to the broader market’s new highs.Returning to SPX, another interesting chart pattern is the price action in late October. Notice how quickly pullbacks were bought on October 22 and 27. These bounces also occurred near the September peaks, which suggests old resistance became new support.
Finally, consider VIX’s close at 15.09 yesterday – its third lowest close since coronavirus slammed the market in late February 2020. Also notice its lower high and quick rejection around 17 this week. This key metric refused to “return to normal” during the entire pandemic. But now that the Fed is tapering, it may be time for the
fear index to get less fearful. If that does happen, it could instill more confidence and spur more risk taking. So while the market has run a lot and bounced sharply, there may still be reasons to think the move will continue.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
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