S&P 500 Parameters Are Well-Defined

November 20th, 2012

by Dominic Cimino

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The 1350 area (shown in the chart below as the horizontal blue line) in the S&P 500, which I presented in a previous article, did indeed hold during the market's first assault. The market was flat today but up nearly 2% yesterday. Where will it go from here? Since everyone has different risk tolerances, time horizons and investment objectives, I refrain from giving definitive market calls in articles presented to the general public. However, that does not preclude me from having strong opinions, and I will share my present one with you. Market direction is currently a virtual coin-flip. That's the bad news.

The good news is that the S&P 500's technical parameters are now very clearly defined, and I will explain them using the chart below.

The big picture is that the market is currently trending upward in a major channel formation (shown as the thick red parallel lines). On a more minor level, the market is likewise trending upward, but in a smaller minor sub-channel (shown as the thinner parallel red lines within the larger channel). The market has found initial support at the 1350 support area and at the bullish minor channel support trend-line. However, just overhead lays a somewhat significant minor resistance area at the 1420 level in the S&P 500. The red arrows show areas that confirm 1420's prior significance, while the lower horizontal red line represents it. The additional horizontal red line just above this level represents a second minor resistance area at the 1470 level, a level created by the current cyclical market rebound high. Major resistance is at the market's all-time high, the 1570 area, while major support can be found at the support trend-line of the major channel formation.

There are several noteworthy points: It's interesting that initial support and resistance levels are converging and we could soon have a break-out, either way. Also, the likely time-frame for the break-out of this convergence is represented on the chart by the yellow triangle, and this time-frame coincides dramatically with that of fiscal cliff clarity. Finally, remember that even if the minor channel support line is violated, the 1350 area must likewise be cast aside if any downward momentum is to materialize.

Note : For additional details, see my S&P 500 at Critical Level: Part 2.

Dominic Cimino

Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Preferred planning concepts, LLC & Cambridge are not affiliated.

© 2012, Dominic Cimino of Preferred Planning Concepts, LLC (You can explore the services offered by Preferred Planning Concepts by viewing us on our website at www.ppcplanning.com) Any redistribution, reprinting, or reference to this chart or content is allowed so long as reference to the author and source is acknowledged.

Important Disclosures

Please be aware that this is not a recommendation to purchase or sell any security. This is not a recommendation for any individual or institution to alter their portfolio holdings. Every individual or institution has its own risk tolerance and investment objectives and perspectives.

Any above opinions of the author should be viewed as such. These opinions in no way represent any type of guarantee. Realize that if you choose to invest in securities, investing in securities carries with it uncertainty and the risk of loss of principal. Lost investment opportunity is also a possibility. Investing in securities carries no guarantees.

Past performance is no guarantee of future results. The price movements within capital markets cannot be guaranteed and always remain uncertain. The above opinions are meant to stimulate thought and should be viewed as such. You are encouraged to discuss these views with your representatives if you have any questions or concerns.

Any indices mentioned are unmanaged and cannot be invested in directly.

It must here be mentioned that technical analysis offers no guarantees of future price movements. Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain.

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