On The Fly: Weekly technical notes for S&P 500

The S&P 500 (SPX) is set to cap a strong week of gains, rebounding over 100 points from the low of the week. The classic "V" bottom rebound has brought price up to the 2750 area, which was the first major support area during the decline that began on February 2. What is remarkable about the rebound is how quickly a new relatively low volatility bullish price channel set up. If we were to extend that current 5-day channel into next week or so, it would terminate at the end of next week back at the old highs and possibly at the 2900 area or higher, depending on whether we are talking about the channel high or channel low line. Support for the index is now at the 2700 area. We have to allow for greater latitude in support and resistance levels given that the price channel range is much wider than we had seen in the period before the decline. Volatility is still considerably elevated from the 12-bound that was more typical in the run-up from November of last year to end of January. A wider channel means that the trend can remain longer-term intact while offering more intraday trading opportunities as volatility remains relatively elevated.