Monday, June 3, 2013

Market Update: S&P 500 breaks down through triangle

I've been writing almost daily about the developing triangle formation in the hourly S&P 500 chart. On Friday I wrote, "we are definitely at a key inflection point with the eventual breakout from the triangle formation likely dictating the market's future direction." Well, it appears as if the eventual breakout was down.


The hourly futures chart above shows the S&P 500 plunging down through the lower boundary of the triangle formation, with a recovery rally occurring in the last several hours.

As per the technical truism "what was support becomes resistance," the 1640-1645 level has become new resistance for the index. Again, as I've repeated more than once in recent past postings, given we're using hourly charts the focus is short-term. Longer-term repercussions could eventually stem from these shorter-term observations, but the point being I do not wish to overstate what we're discussing here in the short-term. Let's not get ahead of ourselves. 

But as I wrote on Friday, clearly this breakdown in the triangle formation has implications for S&P 500 direction over the next several days or even weeks, i.e. it does not bode well for the market near-term.

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