S&P 500 Chart – Hitting Resistance

I charted daily prices for the past six months of the S&P 500 ($SPX) on Friday, July 24, 2009 when it closed at 979.26.  I drew a handful of trend lines and came up with the five lines I left on the chart below.

The big trend line offering resistance is the line of higher highs that started at the end of January 2009.  The SPX came close to it in early May and then touched it twice in June and now we’re back up to it again for another test. The short vertical lines I drew in July show the steep trading channel we’ve been in over the past couple of weeks. It’s been steep and has only offered a two down (aka distribution) days in the past 10 days.

All of that started with the continued support from the late January/early February highs which are marked by the horizontal line in the chart.  That line acted as resistance again in mid-April before the SPX decided that same line worked better as support than resistance.  The trend line of higher lows I drew from the mid-March low was support and now could be another point of resistance since the SPX is hitting its head against that line at the same time as the first one I mentioned.

The 10, 20 and 50 day moving averages are all below the SPX’s current trading point.  I expect to have the SPX come down to touch the 10 day moving average at a minimum.  That could pull it out of this July trading channel it’s been riding and after that we’d have to look at the 20 and 50 day moving averages again.  It’s possible that the July intraday break of the horizontal line in the 870s could be the stepping stone for a much longer move higher.  I’m expecting resistance on the long trend line of higher highs to hold and a better entry point into the S&P 500 to be here soon.  I wish I had gotten in deeper two weeks ago, but expect a good 50% retracement back there soon and at that point I’ll be a buyer.

Williams %R is in the overbought range, but as I always note, it can stay there for a while.  Watch for a break below overbought and be sure to lighten up at that point if you haven’t already.