Traders Don’t Need to Fear This Technical Triple-Witching
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The S&P 500 finished the first day back from the long holiday weekend down a modest 0.2%.
Not much happened headlines-wise, and this continues to be a sentiment-driven market. Given how the index rests nearly 200 points above where it started the year, there has been a thawing of last year’s half-empty way of looking at things.
SP 500 Index Daily Chart
While the economy is still struggling with some headwinds, we avoided last year’s worst-case scenario, and stock prices are rallying on this less-bad-than-feared news.
As nice as this 200-point rally looks in the rearview mirror, we are currently struggling with the triple-witching of 4k resistance, the 2022 downtrend line, and the 200dma.
Any of these is more than enough to put the lid on a rebound, and all three did precisely that at various points in 2022. So the question is, should we be afraid of another rejection, especially with all three hitting us simultaneously?
While there are many reasons to doubt this rebound, we trade the price action, not our beliefs and fears. Sure, these hurdles could send prices tumbling back to the lows. But until they start doing that, we have to give this rebound the benefit of the doubt.
A trend is far more likely to continue than the reverse, and no matter what anyone else says, the trend is higher. Without a doubt, we should expect some choppiness near these significant technical hurdles. Still, until these resistance levels break the market, we should be positioned for the continuation, not the reversal.
The greatest advantage of being an independent trader is the nimbleness of our size. We don’t need to trade the breakdown until after it starts happening. If our trailing stops get hit, we get out. Until then, keep riding this wave higher.
