FX:SPX500   S&P 500 Index
62 0
I was recently asked by one of my students what was going on with the market. She was having trouble making heads or tails of the recent action on the S&P and was asking how she should be looking at the charts.

I thought this was a great question, and I know that she is not alone! I regularly come across market action that will have me scratching my head.

I find that a little perspective can go a long way.

Since the point of trying to understand what is going on is to ultimately look for trading opportunities, we will use a few techniques that give us both: perspective and opportunity.

“Framing” the Market

What I mean by this is to find the significant supports and resistances that are holding the market. Doing so will help define the current movements as well as disclose any potential opportunities.

Channels, Support & Resistance (s/r's)

With these simple concepts we can identify the current market boundaries.

Our first chart shows some long term channel considerations. These are usually easy to identify and define. Note on the S&P that we have a long term channel from previous market action (2004 - 07) and that it is once again being respected.

Note that the channels are not anything crazy or obscure. They are the most obvious support and resistances holding the market and should be easy to find.

(continues on chart 2 linked below)
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