Breakout or Breakdown?
U.S. markets have rallied massively in the last month and have returned to previous highs. Resistance is at hand, and we should soon discover whether the late summer breakdown is re-confirmed by failure here, or another leg higher is in store.
Here is the S&P chart, with strong resistance around 2100. I am view this most recent rally as another small rising wedge.
Here is the longer term view of that same S&P pattern.
The Nasdaq QQQ also broke down from a multi-year rising wedge. It is now testing the underside of previous support.
One stock that may be a useful companion to that trade idea is MMM. Like the S&P, MMM broke down from a rising wedge, and has returned to the underside of old support.
I remain of the view that we are witnessing a topping process. As such, I see the current action as perhaps a final re-visitation of this price area. Naturally, it is a belief I hold loosely as recent years have made all such bearish wagers dangerous business on which profits needed to be taken pretty quickly. We’ll see if this plays out any differently.