S&P 500: Will 2955 Break or Hold?

10/01/2019 4:00 am EST

Focus: OPTIONS

Ricky Wen

ES Trade Alerts, Host

The S&P 500 is facing a serious pivot level as we exit the month of September, writes Ricky Wen.

The fourth week of September played out as a downside range consolidation pattern as the bulls failed their immediate upside setup and bears tried to resurrect themselves. In hindsight, the week played out according to statistics since 1960 as the week after September options expiration remains the weakest week. The only problem with the week is that there was still no decisive winner as price kept flirting with the 2955 breakdown or hold-above pattern on the E-mini S&P 500 (ES). Friday it pierced below 2955 for a few minutes, but the price action was unwilling to close below it, so everything is still stuck in the overall range.

The main takeaway from the fourth week of September is that both sides are starting to get impatient because it’s been two weeks of digestion versus the three weeks of August continuous upside grind. The only thing that matters is whether this is just a simple backtest of August’s breakout 2930-2940 zone or bears finally can resurrect themselves with the 3020s double-top pattern.

What’s next?

Friday closed at 2968.50 on the ES as bulls failed to wrap up the week around the dead highs, so the ongoing Friday closing at highs year-to-date stat has gone down to 69% (27/39 weeks).

Not much has changed since last week, but we’re in neutral mode as price action remains in digestion mode in an overall range and deciding the next move. A little more bullish than bearish still as no major support has been broken, so higher lows setups are still favorable. 

Key Levels:

  • 2946-3025 is the overall range for now with the tighter range being 2946-2995
  • The only thing that truly matters is whether market gets a continuous close above 2955 or bears finally resurrect themselves with a decisive break below 2955 and hold
  • Monday is month-end closing, so focus on the morning and do not get shaken in the afternoon
  • Look for applicable higher lows setup if 2963/2955 holds this morning
  • We’re not expecting the bulls to succeed on the bullish monthly closing print at dead highs because it’s 1.9% away from current levels, but if able this morning to find footing with a higher low, then 2990-3000 area is do-able
  • There are two massive potential setups on the higher timeframes: double-top 3020s pattern vs. 2940 area being a backtest of the month of August double bottom pattern (breakout from 2930s-2940s)
  • A daily close above 2995 is back to immediate pathway; if a close below 2955, then bears can resurrect and prove themselves that this isn’t just a simple backtest of August.

S&P

Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.

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