SPX: Overbought Signals and Key Weekly Level at 6702
Trading and investing is essentially about analyzing the probability of a price move using technical indicators while maintaining confidence in the underlying fundamentals. That approach is enhanced when support and resistance levels are used to validate bearish or bullish setups, and during these days, we’re in defensive mode in case of a pullback comes based on how overheated the indices are.
The following $S&P 500(.SPX)$ chart was published last Sunday in the Weekly Compass, and apart from the overbought RSI and bearish divergence with the oscillator (both conditions that have anticipated a pullback in the recent past as highlighted), the chart showed at the top left a set of support and resistance levels. $6,702 is underlined since it is the central weekly level, the line that is modeled every weekend ahead of the new week, and that level is the one that makes a difference between bullish and bearish momentum.
The central Weekly Levels since April:
The blue line is the central weekly level, and in this case, the support line that follows, also mentioned in the Weekly Compass as “Immediate bearish target” is included in gray. From the chart there are two conclusions about using the central weekly level:
It has been breached very few times during this rally, providing validation of bearish setups. However, the character of this bull market is special considering not one, nor two, nor three, but four very rare bullish signals that have occurred since April, all of them have been documented individually for premium subscribers (links below).
When the central level is mastered with discipline, it can help a swing trader or investor to outperform a buy and hold strategy, in the case of SPX a couple of points, but we will study for $Tesla Motors(TSLA)$ and $NVIDIA(NVDA)$ that it can enhance performance in a larger way.
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