The short and intermediate term direction of the market may be signaled by areas of support and resistance on these two charts. Movement on the daily chart of the Russell 2000 Index over the past several days has been erratic, with a big down day followed by a strong up day, and then yesterday’s mid-session reversal. This volatility, however, has been confined to a range bordered by the 50 day moving average and the 200 day average. A break above 50 day resistance or below 200 day support could be an indication of the short term direction of the broader market.
The weekly chart of the S&P 500 shows the index trending higher in an ascending channel for the last two years. It is currently testing the lower end of the channel and a break below this support could signal a change in the intermediate term direction of the index. A reversal candle at this level or a pattern reversal like the morningstar formation last October would suggest a continuation of the stair-step advance within the channel.