TL;DR
• After a massive 340-point rally, the S&P 500 has hit a wall at major trendline resistance around 6850.
• Price is now consolidating in a tight, choppy range. This digestion phase is normal but can be tricky and frustrating to trade.
• The market is building energy for its next significant move. We are watching for a clean break of the current range to signal direction.
• Today, we will break down the key levels that define this range and outline the plan for catching the coming breakout.
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Quickfire Highlights
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The market has clearly shifted gears. The powerful, one-sided uptrend from last week is over for now. We have entered a period of consolidation, or "chop". After such a relentless run, price needs to build a cause for its next effect. This means we are in a mean-reverting environment contained within a tight range. Trading the edges can be viable, but getting caught in the middle is a recipe for frustration. The dominant behavior is balance and range-bound activity until a clear breakout occurs.
• Failed Breakdowns: This remains our primary long signal. It is the institutional footprint we hunt for. When sellers push price below a key support level, only for buyers to step in aggressively and reclaim it, they trap shorts. This action often marks the start of a strong rally. We saw this play out perfectly at 6701 last week, which ignited a 150-point surge.
• Range Breakout/Breakdown: Given the current tight consolidation, the next high-probability setup will be a confirmed break of the established range. A clean break and hold above the resistance signals buyers are back in full control, while a failure and acceptance below support would signal a deeper correction is underway.
Understanding the current map is everything. Here are the levels that matter most right now.
• Overarching Resistance: 6850. This is not just a number. It is the upper boundary of the major downtrend channel from November. A clean, decisive break above this level would be extremely bullish.
• Current Consolidation Range: The battlefield is clearly defined between 6811 support and 6843-6852 resistance. This is the box we are trading in.
• Key Support: 6811. This is the floor of the current balance area. A loss of this level would put sellers in control for a potential move back towards the 6700s.
• Price Magnet: 6825. This level has acted as a pivot inside the range, pulling price back to the middle. It's the heart of the chop zone.
The game plan for tomorrow is patience. We are in a defined range, and the lowest probability trades are always in the middle of it. Do not force anything here.
• Bullish Scenario: We wait for a clear breakout and hold above the 6852 resistance zone. If that happens, the next logical targets are 6877 and higher. An alternative long entry would be a failed breakdown below 6811, where price quickly reclaims the level, trapping sellers.
• Bearish Scenario: A sustained break and acceptance below 6811 support would be our signal. This would invalidate the immediate bullish pressure and open the door for a deeper pullback, potentially targeting 6780 first.
• Neutral Scenario: If we remain stuck inside the 6811-6843 range, the best trade is no trade. Choppy conditions are designed to chop up accounts. Let the market show its hand first. It has given us a clear box, so we will wait for it to pick a direction out of it.
Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice. Please consult a licensed financial advisor before making investment decisions.