A lot of people have been caught off-guard with the bullish movement that has occurred in the last couple of days. Many are asking how far will this bullish movement go? Are we now in a bullish trend?
Let’s look at the Weekly Ichimoku chart for the SPX. The sentiment for the weekly time if bullish. However, we are not trending at this point. The Ichimoku indicators are in conflict with the sentiment. We have closed above the Kijun Sen which indicates that a possible trend change can occur but we have two major resistance values very close to our current price. Many people are thinking that a possible head and shoulder pattern may occur if price stops at these resistance values. In fact, if price does stop at these values, it has a chance to go through the think part of the Kumo cloud to change the sentiment from bullish to bearish. The future kumo cloud has already turned bearish. This is the first time the future cloud has turned bearish after it went bullish. All the signs are pointing towards the market not being able to break the resistance values. This does not mean, there is a trade at this point. We have to wait and see and confirm before a trade can be setup.
Below is the daily Ichimoku chart. Notice price is in a thick Ichimoku cloud which indicates consolidation can occur. On the daily chart, the resistance values from the weekly chart are also major resistance values for this timeframe too. In fact, one of them is the top of the kumo cloud. Most Ichimoku analyst will say it will break the first resistance value to get the bulls to commit and then not be able to penetrate the second resistance value to trade the bulls. What will happen? Time will tell. This is not a time to setup a mid or long term trade. If you are day trading, keep your stops tight.
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