S&P 500 Fractal End-of-Range Signal

The stock market has been range-bound for quite a while. Below is the weekly SPY chart from my Fractal Stock Grapher software. See the black arrow pointing to the “end of range” signal (click chart to enlarge):

The brown arrow points to the previous end-of-range signal, which was generated at the end of July – just one week before the market plunged in August.

However, an end-of-range signal from the Fractal Dimension Index only tells us that a new trend is likely to begin soon. It does not tell us the direction.

The market has been range-bound for this long because half of investors are thinking: “the economy is improving, so I should be buying stocks”, and the other half are thinking: “the wheels are coming off of Europe, so I should be selling stocks.”

Those two groups are balanced right now. At some point, an event will occur that convinces one side to give up. And when they liquidate their positions, the market will break out of the range and embark upon a new trend.

The moral of the story is that the FDI doesn’t tell us who will blink first, but it does say that the duel is likely to be resolved within the next few weeks.

Also, on October 26, I reported an FDI end-of-trend signal on Apple’s monthly chart. And the mighty AAPL juggernaut did indeed stall out. It was $400 on that day, and has been below that level almost every day since.