After a week of going nowhere, the stock market is set to make a big move today.
The S&P 500 started the week at about 2800. It closed yesterday at 2815. So… yawn.
Most traders would have been better off napping through the week rather than waiting for something to happen in the stock market. Now, though, all of that inactivity has stored up a lot of energy and has created a technical picture that could lead to an explosive move today.
Look at this 15-minute chart of the S&P 500…
This chart has morphed into a consolidating triangle pattern – which shows a series of lower highs and higher lows. It presents a period of back-and-forth choppy action, where energy builds as the chart gets closer to the apex of the triangle.
Nothing has happened in the market all week. But, energy has built up enough to fuel a big move, one way or the other, quite soon.
A 15-minute chart is ultra-short-term. Patterns in this time frame tend to play out within one or two days. So, traders should be looking for the market to break out of this pattern sometime today or Monday.
The size of the triangle, from the start of the support line to the start of the resistance line, measures about 40 points. So that gives us a targeted move of 40 points in the direction of the breakout.
In other words, if the S&P 500 breaks out to the upside of this pattern, then we could see a move as high as 2860 on the index. If the chart breaks to the downside, then we could get a move down towards 2750.
Like I said… it has been a quiet week so far for the stock market. But, based on the look of this chart, today could get noisy.
Jeff Clark
Reader Mailbag
How have you been trading this quiet market? What patterns do you look for?
And as always, you can send any other trading stories, questions, or suggestions to [email protected].