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Are the S&P 500 constituent charts in topping patterns?

The constituent charts appear to be finding resistance near tops.
The constituent charts appear to be finding resistance near tops.
Photo by Ron Zimba

Many of the S&P 500 constituents have run into resistance levels recently that they have been having trouble breaking above, many for several months and some for over a year. Others are returning to levels that they have found resistance at in the past. These chart formations are occurring at the same time the S&P 500 has moved above the upper trend line. Others that have broken above resistance levels have fallen off these levels after short runs.

Does this mean the constituents are in topping patterns? Although we won’t know for certain for some time to come, Ron believes that stocks are probably near an area that could provide a large pullback, but this pullback will probably result in a bullish rebound. Pullbacks are sometimes necessary for stocks to build momentum in a rebound that carries them through resistance levels.

The accompanying video is a companion video to the video contained in The S&P 500 and the upper trend line article published earlier, and can be found here.

Although it is not possible to look at all the constituent charts in this video, resulting in only a handful of the constituent charts being looked at, it tries to show the patterns that are currently being seen in many of the constituent charts. These patterns show that many of the constituents have become choppy after reaching current resistance levels, that many have trended sideways, and that those that have broken higher are having trouble continuing higher in these moves. It also tries to show these patterns are mostly sideways at this time, neither pushing above resistance levels, nor falling lower below support levels.

Ron points to possible resistance and support areas on these charts that it appears these constituents could or have come into contact with, and tries to point to areas of support or resistance he feels could be of concern.

The chart formations on the constituents are also occurring within a timeframe that the S&P 500 has pushed above the upper trend line and near a potential resistance level. The first article and video explore the results of past moves above the upper trend line and past articles have looked at the resistance the index is likely to encounter from 2000 to 2140.

Since there is a great number of charts that are showing patterns that could lead to a pullback, some caution should be exercised until these patterns show a movement that might indicate stocks could again begin to make new highs or reach likely support levels if they should break lower.

The current chart formations make a large drop seem possible, but a drop that reaches crash potentials seems somewhat remote, unless of course a news event aids in this retreat.

The charts used in this video are provided by ScottradeELITE, similar charts are available at Big Charts.

A constituent list of the S&P 500 can be found at the S&P Dow Jones Indices website; unless the download is made with a paid membership, it will only provide the constituents as of June 30. Additional research of index changes since is required to obtain the current constituent list.

Many of the Dow Jones components are looked at in this video. A list of the Dow components, all of which are S&P 500 constituents, can be found at the CN Money website.

Have a great day trading,

Disclosure: Ron has investments in AA, ABBV, ABT, CAT, CSCO, DD and GE. Ron has no investments in A, AAPL, ABC, ADBE, AXP, BA, CVX, DIS or GS Ron is currently about 75% invested long in stocks in his trading accounts. Although he has no intensions of going flat into the possible resistance level from 2000 to 2140, he has been slowly reducing his investment level as the index nears this potential resistance and is currently at his lowest investment levels since 2007.

Disclaimer: The information provided in this article is Ron’s perception of the current conditions and what he thinks is the most probable outcome based on the current conditions, the data collected and extensive research he has done into this data along with other variables. It is intended to provoke thought of the possible market direction in his readers, not foretell the future. Ron does not claim to know what the stock market will do. If the stock market performs as expected, it only means he is applying the stock market history to the current conditions correctly. His perception of the data is not always correct.

This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.

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