The S&P 500 is locked in a 100 point trading range (2040-2140) since March because of a serious split in sector performance. At less than 5% this is the narrowest range in several years. Note that Bollinger Bandwidth on the weekly chart reached a 20+ year low in July. This means the Bollinger Bands are at their narrowest in over 20 years. How's that for a contraction. John Bollinger theorized that a volatility expansion often follows a volatility contraction. Chartists, therefore, should prepare for significant move in the coming weeks or months.
The upper and lower bands mark the first levels to watch for a directional clue. With the index hitting 52-week highs in February, May and July, the overall trend is up and this favors further upside. I would use the lower Bollinger Band and March-July lows to mark key support in the 2040-2060 area. A weekly close below 2040 would show enough selling pressure to forge a support break and suggest a trend change.
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