Testing Triangle Resistance – Take #5

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After the strong day yesterday SPX is close to a test of triangle resistance in the 2110 area. If the triangle breaks up, as I’m expecting though not necessarily today, then bulls also need to take SPX over the last high at 2111.91, and then the current all time high at 2119.59. The 50 hour MA, which closed yesterday at 2098, is key support and any significant or sustained break below it would be a warning signal that the bulls might be unravelling for today. SPX 60min chart:

150421 SPX 60min Triangle and 50 HMA

I’ve had a few questions about why I’m expecting to see a test of the 2170 area here, and there are a number of reasons but a key one is this. I’m expecting a retracement this summer that will either test the monthly lower band or at the least trade well under the monthly middle band, currently at 1934.

Historically such a move on SPX either comes directly from a hit or near miss of the monthly upper band (majority of cases) or a hit in the previous few months without a strong further move up. . An exception was the 1937 top where the upper band had not been tested at 11 months and well below, but that was a major top before what was, in effect, a crash. The monthly upper band on SPX was last tested 17 months ago in the 1850 area, and unless we are to see something historically unprecedented on SPX this year, the upper band should be tested before this decline begins. The monthly upper band is currently at 2171. SPX monthly chart:

150421 SPX Monthly Trendlines BBs MAs

I’m leaning bullish today, though we may see a retracement from the first test of triangle resistance. If there is a hard break below the hourly 50 MA today then we could be seeing a serious reversal back down towards triangle support.