The S&P 500 cash index (SPX) closed at 1109.55 on Friday, a tiny gain of 0.5% for the week. The holiday-shortened week didn’t offer much drama. The trading volume was light and so was the news.
This week is a quadruple expiration week. Most traders have finished their summer vacation and will be back this week. Trading activity will pick up, and so will the volume. But choppy moves will continue.
Technical analysis
The SPX has moved above three major resistance lines, and is challenging the 200-day moving average line 1115, which has been acting as resistance for 4 months. A break above 1115 could force more short covering to push price higher up to 1125-1129 — under August’s high area.
There are two possible outcomes. One is based on H&S pattern. If this pattern remains intact, today or tomorrow SPX should quickly find the top and start to reverse. The top should not exceed May’s high of 1131.23. The right shoulder has formed a triangle pattern. The top line of this triangle is 1121-25 area, which could be the area where option players decide to stand and fight. Staying inside this triangle pattern is what we should expect for most of this week. If SPX moves above 1131.23, the H&S pattern will be invalid.
The second possibility is based on an A-B-C correction pattern. Momentum was quite strong in the past 7 days and if the price moves above 1131.23, it will confirm that a C top is the likely target before the price reverses.
Equity options, stock index futures, stock index options and single stock futures all expire this week — the quadruple-witching expiration. The process of closing expiring contracts and opening new ones often introduces choppiness and volatility into this market.
Monthly resistance 1150 and support 1000; Weekly resistance 1150 and support 1075
Daily outlook – e-mini futures (ESZ0)
The recent price movement in the ES is very similar to the movement in early August, but the upside momentum was stronger. If ES can break above 1115.50 today, it is likely to move higher to the top of the consolidation range.
Today is our CIT day. ES could run up fast to shakeout many weak hands and quickly reverse down to fill three unfilled small gaps.
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