The S&P 500 is bobbing along the top line of an ascending right angle triangle. The index has been waiting for bulls to bite and force the S&P out of the triangle.
The right angle triangle is a classic pattern and easily identified. The top line is where buyers and sellers meet, over and over again. However, buyers return to the tug-of-war more quickly each time, creating the ascending bottom edge of the triangle.
Stocks/indexes tend to surge out of the triangle on strong volume and, normally, this pattern is broken on the 3rd or 4th attempt to bypass resistance. We are currently in the middle of the 4th attempt. The closer to the triangle’s point the breakout occurs, the less impactful the event will be.
Oddly, in this case anyway, ascending right triangles tend to occur closer to market bottoms than tops. The technical set-up is known to be a reversal pattern. So, investors better cross all finger and toes hoping for a breakout and not breakdown.
Last week was void of any economic news announcements that could have jolted stocks beyond the barrier. This week, we get three significant reports:
- Durable Goods: Tuesday, 8:30 am eastern
- Personal Income & Outlays: Thursday, 8:30 am eastern
- ISM Mfg Index: Thursday, 10 am eastern
If these reports show that the economy is still gathering momentum, it should be enough for the S&P to break out of its trap.
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