For the last two weeks the S&P 500 has been trading between 2703 and 2745 which
are the 50% and 61.8% Retracements Level calculated from the January high to the
February low.
As a result this has led to a consolidation pattern typically referred to as a
Flat Base (FB). We will likely see a breakout soon from this pattern
probably next week. The initial upside target would be at 2800 which is at
the 78.6% Retrace, while the downside target would be near 2660, which is at the
38.2% Retrace.
Finally the Volatility Index (VIX) has been exhibiting a narrowing downward
channel since March leading to a Wedge type pattern. Typically a Wedge
type pattern is followed by a decent move in the opposite direction of the
trend. In this case, since the Wedge is a descending type, normally one
would expect an upside reversal at some point. Since the VIX and S&P 500
usually move in opposite directions, an upside reversal in the VIX, normally
would lead to some selling pressure in the S&P 500. Thus we shall see how
things evolve as we move into June.
Amateur Investors
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