Triangle patterns are continuation patterns, evidenced by a triangle-like shape on the charts. Triangles come in three categories: ascending (bullish), descending (bearish), and symmetrical (neutral). While the shape of the triangle is pertinent, the direction that the market moves in when it breaks out or breaks down matters the most.
The triangle forms when security narrows following a downtrend or an uptrend, involving prices moving into a tight coiling pattern with time. The compression in prices signals a battle between the bulls and the bears.
However, it is difficult to know in advance what direction the breakout will be, as one side of the market will give in, resulting in either a breakout or breakdown. Traders should not focus on which direction the price goes. But be prepared for movement in either direction.
After three months of choppy and directionless trading, the stock market appears headed toward an inflection as popular market indexes have converged toward the apex of their triangle patterns. Interestingly, the convergences occur during the September FOMC meeting (9/20/23), the end of the third quarter, and the seasonality weakness period.
Will the triangle breakouts confirm the August 2023 lows and signal the start of the year-end rallies?
Or will the triangle breakdowns confirm a lower low and the start of deeper corrections?
Key technical levels for SPX, INDU, NYA, COMPQ, NDX, MID, and SML are summarized below:
S&P 500 Index (SPX – 4,443.95)
Resistance = 4,484 (50-day ma) and 4,512-4,513 (top of the triangle and Jul 2023 downtrend and 9/14/23 high). Secondary resistance = 4,541.25-4,567.5 (8/23/23 gap-down and 9/1/23 negative outside day high) and 4,607.07-4,637.30 (Mar 2022 and Jul 2023 reaction highs).
Support = 4,416.5-4,421 (bottom of triangle and 9/19/23 low). Secondary support = 4,335-4,356 (Aug 2023 lows).
Dow Jones Industrial Average (INDU – 34,517.73)
Resistance = 34,978-35,136 (8/31 and 9/14/23 highs and top of triangle). Secondary resistance = 35,578.5-35,679 (Aug 2023 highs).
Support = 34,029-34,319 (Aug 2023 lows and Mar/May 2023 uptrend). Secondary support = 33,610-33,809.5 (late June and July 2023 lows and 200-day ma).
NYSE Composite Index (NYA – 15,929.01)
Resistance = 16,046-16,191 (50-day ma, Sept 2023 highs, and Jul 2023 downtrend). Secondary resistance = 16,320 (8/10/23 high) and 16,458.89 (7/27/23 negative outside day high).
Support = 15,811.5-15,855 (May 2023 uptrend and 9/7/23 low). Secondary support = 15,450-15,632.5 (6/23/23 and Jul/Aug 2023 lows and 200-day ma).
Nasdaq Composite Index (COMPQ – 13,678.19)
Resistance = 13,882.5-13,958 (50-day ma and 9/14/23 high). Secondary resistance = 14,043-14,149.5 (9/1/23 high and 8/2/23 gap-down, and Jul 2023 downtrend) and 14,371-14,446.5 (Jul 2023 reaction highs).
Support = 13,334-13,428 (6/26/23 low and the Jan 2023 uptrend). Secondary support = 13,062-13,181 (Jun 2023 breakout, Aug 2023 lows, and bottom of late Jun 2023 downtrend channel).
Nasdaq 100 Index (NDX – 15,191.23)
Resistance = 15,315 (50-day ma). Secondary resistance = 15,519-15,619 (Sept 2023 highs. 8/2/23 gap-down, and the Jul 2023 downtrend) and 15,803.5-15,932 (Jul 2023 highs).
Support = 15,139-13,165 (9/7/23 low and the Jan 2023 uptrend). Secondary support = 14,484-14,715 (bottom of Jun 2023 downtrend channel and Aug 2023 lows).
S&P 400 Midcap Index (MID – 2,558.64)
Resistance = 2,644.5-2,649 (50-day ma and Jul 2023 downtrend). Secondary resistance = 2,675-2,695 (8/10 and 9/1/23 highs) and 2,743.01 (7/27/23 negative outside high).
Support = 2,550-2555 (200-day ma and Jul, Aug, and Sept 2023 lows). Secondary support = 2,494-2,513 (Oct 2022 uptrend and 6/23/23 low).
S&P 600 Small Cap Index (SML – 1,176.48)
Resistance = 1,198-1,200 (9/14/23 high and the 200-day ma) and 1,225-1,244.5 (50-day ma, Jul 2023 downtrend, and Jun 9/1/23 high). Secondary resistance = 1,273-1,282 (Feb 2023 downtrend and Jul 2023 highs).
Support = 1,164-1,184 (6/23, Jul, Aug, and Sept 2023 lows). Secondary support = 1,131-1,135 (Sept 2022 uptrend and Dec 2022 lows).