Editor’s note: This article was originally published on Thursday, September 18 via Jeffclarktrader.com
Last week, we were looking for a big move higher in oil… soon.
And boy, did we get it. Oil popped nearly 15% higher on Monday.
Here’s the updated chart…
Oil broke out to the upside of the consolidating triangle pattern and it rallied all the way up to $63 per barrel – the exact target of the pattern.
You won’t find a better example of how technical analysis plays out. This chart was building up energy for a big move. And, the bomb strikes on the Saudi oil fields provided the necessary catalyst.
With that in mind, let’s turn our attention to the broad stock market and today’s FOMC announcement.
The S&P 500 often makes a big move in reaction to an FOMC announcement. And it sure looks like the market is gearing up for a big move later today.
Look at this five-minute chart of the S&P 500…
Starting at about mid-way, and through the day on Monday, the index got stuck in a ridiculously tight seven-point trading range (the blue circle on the chart).
Think about that for a moment…
Even with all of the millions of investors and all of the trillions of dollars at stake, the most popular index in the world spent one and a half days trading inside a 0.2% range. This happened while the price of oil was screaming higher, while tensions between the United States and Iran were heating up, and while traders braced for the impact of an FOMC announcement.
As we saw with oil, these tight, consolidating patterns serve to build up energy to fuel the next big move.
Now… This is a five-minute chart. So, we’re not expecting a move on the scale of oil’s move on Monday (which was based on a daily chart). But you can see how all of the various moving averages have coiled together on the S&P 500 chart. This tells us that energy is building. And the index is gearing up for a move of up to 20 points or more in one direction or the other – either up to the most recent resistance level at about 3020, or down to the most recent support at 2975.
Patterns on the five-minute chart tend to play out within a day or two. So, it seems reasonable that the catalyst for a large move today will be the FOMC announcement this afternoon.
If the action over the past day and a half was too slow for you, then cheer up. There’s a bigger move coming after 2 p.m. today.
Best regards and good trading,
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