The Bullish Setup: Understanding the Wyckoff Spring
A spring in technical analysis is a classic setup used in Wyckoff methodology that signals a bullish reversal after a market has been testing support levels. Right now, we’re seeing that exact spring-type action in the S&P 500.After testing the support, the market has committed above it, and that commitment is driving the rally upward. This is accompanied by a slight increase in volume—a positive sign. The fact that we’re seeing higher volume at these levels compared to previous lows suggests growing bullish momentum.This upward movement has now brought the S&P 500 into a resistance zone, which the market is currently testing. Typically, this is where the real battle between bulls and bears begins. As of now, the structure is favorable, with higher lows forming and a decreasing supply (selling pressure), which are additional bullish signals.
Key Resistance Levels: What to Watch
We’re currently in a key resistance zone, and the market is testing this level. The first resistance point to watch is near 5560, and just beyond that lies the all-time high level. If the market can break through these levels, we may be looking at a strong rally ahead.But don’t get too excited just yet. While the setup looks promising, the real confirmation comes after a pullback or a reaction. If the market pulls back slightly and forms another higher low with decreasing supply, that would be an ideal scenario for bulls. This pullback would give traders another opportunity to jump in before the next leg up.
The Fed Factor: How the Upcoming Announcement Could Trigger a Move
While the technicals are showing a bullish structure, there’s another looming event that could shake things up: The Fed’s announcement. Scheduled for Thursday, this announcement could be a game-changer depending on what’s revealed.If the Fed’s tone is more hawkish than expected, it could trigger a sell-off. A big bearish bar with a spike in supply could indicate that the market is preparing for a longer consolidation phase or a potential downtrend.However, if the Fed’s message aligns with market expectations or is seen as dovish, the bulls could take full control, pushing the market past the current resistance zone and igniting a rally.
The Importance of Volatility and Supply
One key element to watch here is volatility. While the market has seen some decreasing volatility alongside decreasing supply, it’s important that these trends continue if the rally is to sustain itself. A sudden spike in volatility, combined with an increase in supply, could lead to a market breakdown.We’ve seen the market show strength recently, with higher lows forming and quick recoveries on dips. These are encouraging signs for bulls, but the road ahead depends heavily on how the market handles this resistance zone and what happens after the Fed’s announcement.
What to Expect: Breakout or Consolidation?
If the market manages to hold its gains and consolidate without an increase in volatility or supply, we could be on the brink of a major breakout. However, if the Fed disappoints or if we see a spike in volatility, the market might enter a longer trading range.Traders should watch for a reaction after the Fed announcement, as that could provide the best clue for what’s next. If the S&P 500 commits above the resistance zone, this could signal a strong bullish continuation. On the flip side, if the market breaks down, expect a test of the lower support zones.For full detailed video analysis of the S&P 500 using the Wyckoff method plus the 3 stocks I am paying attention for entry setup, refer to this post from the WLGC session on 17 Sep 2024.
Conclusion: Bulls in Control, But Fed Holds the Key
All signs are pointing to a bullish structure, but the upcoming Fed announcement will likely determine whether this rally continues or stalls out. While the current market action shows strength, with higher lows and decreasing supply, it’s crucial to monitor how the market reacts to both technical resistance and the macroeconomic backdrop.The key takeaway for traders is to be patient. Wait for a pullback or reaction to confirm the next move, and keep an eye on how the market handles resistance. Whether we see a breakout or a consolidation, the next few days will be critical in shaping the market’s direction.More By This Author:TransUnion Shows Strong Signs Of Outperformance – Here’s What To Watch
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