We just saw a rare diamond pattern on the S&P 500 index, forming along with several other technical arguments of interest.
The market is now breaking that area, but will it be enough to draw in sellers and refresh the downtrend lower?
G’day equity traders! As mentioned above, we’ve got a pretty interesting sight on the charts today with a rarely seen diamond pattern forming on the four hour chart of the S&P 500 Index. This is a type of consolidation pattern where traders watch for both long and short setups after the pattern breaks.
This formation happened right at the falling moving averages, Fibonacci retracement area, and the August swing low around the minor psychological area of 4350.00. So, it’s actually no surprise that bulls and bears were battling it out to a stalemate in early October, trying to figure out where to go next.
At the moment, it looks like the bears are gaining control as we can see a break out of the diamond to the downside, which may draw in more sellers and keep the downswing going.
If so, that fresh selling pressure may be enough to take the market back to the previous swing low around the 4200.00 major psychological level before buyers start showing up to take profits and/or put on contrarian plays.
Of course, we’ve got to consider that this could be a fake out in the making, with buyers starting to scoop the dip and turn the October bounce into an actual reversal move that could push the market back to the strong resistance area around the 4500.00 major psychological area.
As always, it’s the news headlines, economic data and market narratives that will determine who wins out between the bulls and the bears, so it’s probably a good idea to keep up with market flows by checking out our Daily News and Watchlist posts, economic calendar and Event Guides before picking a bias and working on your risk management plan!