Market participants at a standoff awaiting directional resolution of a defined explosive technical pattern. Resolution will determine the direction of the next durable trend.
The broad equity markets (as represented by SPX) are at an important inflection point with an explosive contracted volatility pattern awaiting resolution. "Diamond" patterns portend extended price moves either higher or lower. Normally resolution is in the direction of the prevailing trend but with most indices at multiyear or historic highs and overdue for a corrective throwback to test lower support levels, a violation of the pattern's lower boundary is now equally likely. It is advised to not over anticipate resolution as prudent traders/investors will wait for a daily close above/below the pattern's boundaries.
Our initial SPX price targets after a defined pattern resolution is observed are:
Resolution higher: ~2054
Resolution lower: ~2022
Looking over the horizon - Further lower prices are expected if resolution is lower (beyond 2022 after an initial reflex bounce) as layers of moving average support levels have yet to be tested during this current rally.