Will S&P 500 retest an important former breakout area this week?

As you can see from the chart, there is a very obvious line of resistance that was broken two weeks ago during the Santa Claus rally. A line that held as resistance multiple times over the course of 1.5 months. The S&P is notorious for testing prior breakout and breakdown areas, especially when it is as important as this one and it was breached during a genuinely positive time in the market with lower volume.

I'm neither bullish or bearish on the S&P. What I do know is that the S&P is going to come back to that breakout point at some time. It's too important not to revisit because it caused multiple rejections and a lot of volatility off that resistance. That markets love to test these important areas.

Price can go higher and stay extended for some time. Eventually it should correct down to test the line.

Scenario A - Bullish: If price manages to get above the resistance and test the line and continue up, that's a buy.

Scenario B - Also Bullish: If price bounces off the important trend line, that's a buy.

Scenario C - Bearish: If the line does not hold as support, look for a rejection off the line, that's a sell.

Do not use real money to trade my idea. This is just fun for me to analyze and share my view of the market.

Good luck

Comment:

Look how magnetic price was to that very important breakout area. Like I said, I didn't know when or from what height, but it would come back to that breakout.

scenario a is no longer valid. Will it be scenario b or c that wins? If scenario b wins and we break 4800 again, this thing is going to melt up.

If scenario c wins and price is rejected, look for some increased volatility to the downside.

Be careful out there.

Trade closed: target reached:

Scenario C played out and we got the volatility to the downside as expected. I had a successful short in the market and took profit and left a little to let it ride. I'm closing out this trade idea and looking for the next opportunity.