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Both long- and short-term chart patterns are used to identify the important price levels for the S&P 500, thus allowing traders to plan their strategies more effectively.

The S&P 500 is compressing between a shorter-term and broader consolidation pattern, so it could make for an interesting breakout resolution yet to come.

Let’s take a look at the bigger-picture market structure and then zoom in on the intraday charts to note key reference levels.

First, the broader picture starting with 2011:

Click to Enlarge

To recap, when we say “market structure,” we’re referring to the progression or sequence of price highs and lows.

See related: See Market Structure Like the Pros Do

In simplest terms, a series of higher highs and higher lows comprises an uptrend (vice versa for a downtrend), and a series of compressing highs and lows indicates a sideways consolidation structure.

Unfortunately, 2011 was more of a broad consolidation or sideways trend structure than anything else, which makes it very difficult to trade. Traders often do best in trending environments.

Anyway, I highlighted “value areas” or midpoints of known consolidation periods—rectangles—in the context of the bigger picture.

We see three distinct “value areas” to watch:

1. 1,330 is the upper range for most of 2011
2. 1,165 is the lower range from August to October 2011
3. 1,250 is the current short-term value area from November to the present

Continued…