S&P Update: Testing Key Supply Levels with Strength

In the current market environment, the S&P is testing a critical supply level that deserves our attention. What makes this situation particularly interesting is how the index appears to be handling this resistance zone with remarkable strength compared to similar historical patterns.

Comparing Current Movement to 2020

When we examine the 2020 market action, we can observe a somewhat similar pattern where there were “two bars down” before the market began moving upward again. However, the current scenario displays even greater strength than what we witnessed in 2020.

The velocity of the recent upward movement has been quite impressive, showing surprising momentum without requiring significant effort to advance. This effortless strength can be attributed to some hidden buying that appeared earlier in the pattern, creating what market technicians might call an “ease of movement” in the swings we’re observing.

Technical Structure and Important Levels

Looking to the left on our charts for context reveals several important structural points that define this market. The access line we can identify connects multiple significant market events, including:

• The US election period
• Multiple tests of support
• Areas where supply overwhelmed demand
• A failed attempt to break through resistance

This led to a negative extension, resulting in a period of weakness. Now that we’ve returned to this level, what’s most notable is how muted the volatility is compared to previous interactions with this zone.

Reduced Volatility: A Bullish Sign?

The lack of significant volatility at this supply level stands in stark contrast to what we observed during previous tests of this zone. Earlier approaches to this level were marked by considerable price swings and clear reversals. Currently, we’re seeing almost nothing in terms of volatile price action.

This reduced volatility while testing a key supply level can be interpreted as an encouraging sign. When markets approach significant resistance with decreasing volatility, it often suggests underlying strength and potential for continuation rather than reversal.

What’s Next for the S&P?

A pause at this supply level would actually be healthy for the market and could help “recharge the batteries” for a continued move upward. The comparison to previous market structure suggests a target that “makes a lot of sense” with a potential “one and two” pattern before attempting to move higher.

The current price action, characterized by strength, reduced volatility, and similarity to previous successful breakouts, points toward a potentially constructive resolution of this test of supply.

For investors and traders monitoring the S&P, this technical juncture represents an important inflection point. The market’s behavior at this level could determine whether we see consolidation before further advances or if the strength continues unabated, pushing through this supply zone with the same ease of movement we’ve witnessed in recent weeks.

As always, keeping an eye on how price reacts at these technically significant levels will provide valuable clues about market direction and potential opportunities in the stock market landscape ahead.

This analysis was taken from the Wyckoff Trading Course – Part 2 and is for educational purposes only. You can get more info on whether you are eligible to enroll in the Wyckoff Trading Course – Part 2 here.

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