Chart of the Day: Potential Buy in S&P 500

Yesterday’s weak closes in major stock indexes do threaten trend integrity, at least on the intermediate term: though fairly small on a nominal basis, these moves were large on a volatility-adjusted basis and have the potential to lead to further downside. (Bears will also find support for their case in the behavior of Asia overnight.) However, a more likely scenario than an extended selloff is a quick recovery, which would be a strongly bullish signal. Watch a potential failure test around B, on the chart, which would also leave a completed complex consolidation (A-B and C-D being the down legs—a slightly unorthodox structure since the high and low of swing D are so close in time). Flexibility, and a willingness to discount headlines in favor of price action, are essential.


Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.