US Stocks at Maximum Resistance?

On 08/20/21 the  US stock market as measured by September  S&P 500 E-Mini Futures contract (ESU2021) may have reached a maximum resistance area. If so, an important secondary top could be in place.

A  key aspect of the ”Market Profile” method is discovery of support/resistance zones. This can be achieved by examining either price or volume clusters.  The largest cluster areas, referred to as Point of Control (POC) are the maximum support/resistance zones.  POC  can be discover by examining each trading day or by viewing a fixed trading range.

The 30 – minute ESU2021 chart courtesy of Trading View illustrates a fixed range market profile.

This chart shows trading volume on a vertical axis with the highest volume bar corresponding to the most frequent price bars.  The range of the volume profile is from the peak made on 08/16/21 to the bottom on 08/19/21.

On 08/20/21 ESU2021 reached the area of maximum volume resistance, implying a possible intermediate top.

Point and Figure charts are similar to the market profile method and can be used to help confirm potential support/resistance zones.

Point and figure charting does not plot price against time as time-based charts do. Instead, it plots price against changes in direction by plotting a column of X’s as the price rises and a column of O’s as the price falls.

Because P&F charts compress price action, smaller time frames are needed  to discover potential areas of support/resistance.

The 5 – minute ESU2021 chart illustrates action since 08/01/21.

The P&F maximum price cluster corresponds to the POC chart.

Stochastic is one of the more sensitive price oscillator indicators and can frequently give early hints of a potential trend change.  Sixty – minute Stochastic is good for discovering intermediate size trend changes.

The 60- minute ESU2021 chart illustrates Stochastic action.

Late in the 08/20/21 session ESU2021 60- minute  Stochastic reached the level which corresponds with the prior three intermediate peaks and implies at least a near-term top.

An  ESU2021 move above the resistance zone opens the door for a move back to at least the 08/16/21 all-time high.  A  move down opens the door for a retest of the 08/19/21 bottom.