S&P 500 Market Analysis: Examining the 2017 Pattern and Current Price Action

The S&P 500 continues to display a distinctive pattern where each time demand has deteriorated, sellers have been unable to push the market significantly lower. This creates a market environment that traders are closely monitoring for similarities to historical patterns.

Understanding Current Market Dynamics

The current market environment presents a specific challenge. The dominant force consistently shows some elements of weakness and deterioration. However, when opposing forces enter the market, the result doesn’t materialize into anything big or meaningful.

When supply does come in, the subsequent price action typically includes retests. These retests occur quickly and negate the potential bearish implications. The pattern shows that after initial weakness appears, immediate retests prevent follow-through to the downside, maintaining the overall structure.

The 2017 Market Comparison

The current price action shows similarities to a pattern observed in 2017. During that period, the market experienced a range-bound phase that was followed by a strong acceleration. The question traders are considering is whether this pattern will repeat.

Given the strength behind the current market structure, a significant drop appears unlikely. With so much strength present, the market is not simply going to drop. Rather than waiting for a huge reaction, traders should be watching for more measured action—situations where something comes in, but nothing materializes out of that.

Market Character and Timeframe Considerations

If the market is to shift or have a major change of behavior or change of character, that process will take some time. Large positions that have been accumulated cannot be unwound instantly. This stands in contrast to events like the 1987 crash, which was mentioned as a reference point for rapid market changes.

Vertical Absorption Pattern

The current pattern exhibits what can be described as vertical absorption. The characteristic of this type of pattern is that after the vertical absorption occurs, speculation comes in. According to the analysis, speculation looks beautiful and attractive following these patterns.

This type of setup is described as a period where traders could make what may not be the biggest money, but the easiest money. The predictability and clarity of price behavior during these periods provides specific trading opportunities.

Key Observations for Market Participants

The pattern suggests that market participants should adjust their expectations. Rather than anticipating dramatic reactions, the focus should be on recognizing when forces enter the market but fail to produce meaningful follow-through.

The 2017 comparison provides a potential framework—a range-bound period that preceded acceleration. Understanding these dynamics helps traders recognize the current market structure and the time requirements for any genuine shift in market character.

Disclaimer: This content is for educational purposes only and should not be considered financial advice.