Is the SP500 due for a pull back?

The market has been going up for some time now. Last year was the first time we saw not just a pull back but a time of consolidation on the Weekly chart and below. At the second half of last year we began to break out of that range and move to break out higher. Question is how far can this go? We can always discuss what’s going on in the news, which there is nothing wrong with. It’s important to use these fundamentals to bring attention to the chart but ultimately in the end the chart should be used as the final answer. It’s key to take the emotions out of it all and let the chart tell you what is going on. Price will give you plenty of signs. Using Ichimoku with price will help identify key levels to play from as well. So look take at the charts.

 

Here below is the monthly chart. As you can see we have trended for some time now. Look at all that money that was made since recession. ( if any one that had any money left ) Buy low and sale high. We can see some profit taking from last year. Price pulled back to the Kijen-sen, even breaking it and hitting our trial stop dots. But yet price kept going up. As of right now the monthly looks very strong. Never losing strength even when it pulled back. So any pull back on the lower time frames would probably be considered minor pull backs. Lets take a look at the the Weekly.

ES Month

Here is the weekly chart below and the chart shows strength and a healthy trend. But you can see we are up against the Tenjin-sen. For the trend to stay strong, price will need to stay above the Tenjin-sen. If price does break the Tenjin-sen then there could be a good chance for a pull back on the lower time frames. We can get a look at the probabilities of price breaking the Tenjin-sen by looking at the daily. Lets take a look.

 

es Weekly

So far the Kejin-sen has held up the trend on the daily but recently we have broken the kijen-sen and starting so show weakness. This is a sign of a major pull back occurring on the daily. I would look for the bottom of the cloud to be the support. This is important because if the bottom of the cloud is broken this could lead to a bearish cloud break out. But as for now our Month and Week charts are strong bullish. So we might get some movement into the cloud for sometime on the daily which will mean that we will get a lot of consolidations, fake break outs on the swing time frames. The daily will need it to get above the cloud again before any good set ups can occur on the swing time frame. Take a look at the 4hr.

ES Daily.1ES Daily.2

 

By understanding the Daily, we can now see what’s going on in the 4hr charts. Right away we see consolidations and fake break outs and even break out failures. So its important to be careful and picky about what trades are taken at the moment.

 

 

 

 

ES 4hr.1 ES 4hr.2

Keep an eye on the daily and the weekly to get clues as far as if a major pull back is setting up or just a minor pull back. By watching to see if the weekly closes below the Tenjin-sen and the Daily hitting the bottom of the cloud we can gauge the pull back and watch for opportunities to get in. To stay bullish, price would need to get above the cloud on the Daily before looking for set ups, but if price stays in the cloud the probabilities start to lean towards the daily breaking down and bring the weekly down. The key is to let the chart tell you the story. Watch for signs. This is what is great about using Ichimoku.  Take your emotions out of the process and let the chart tell you the story.

 

 

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About the Author Michael Colquitt