Double Bottom Scenario

The two recent low near 1040 made by the SP500 formed a potential double bottom. Since next week is options expiration week, the price actions will likely cause the SP500 to move above the double bottom breakout level near 1106. This breakout can cause the SP500 to move toward the 1170 target level projected by the double bottom measured move in one of two possible scenarios.

One scenario could be the SP500 will retrace back to the breakout level of 1106 when it reaches the 68% Fib retracement level at 1120, or the other scenario is the SP500 could hit resistance at the 50 SMA near 1140 (the 78% Fib retracement level) then it moves down to test the breakout level of 1106. After the SP500 completed a successful test of the breakout level for support, it will resume its move toward the 1170 target.

The following is a daily candlestick chart for the SP500 showing the various levels for the double bottom to play out.



Below is a daily candlestick chart for the SP500 ETF, SPY applying the same analysis used on the SP500 index to illustrate various levels of possible support and resistance, and the measured move target.