Geometry of markets and why some numbers in the S&P 500 index are working for support or resistance now

It's always fascinating to work out geometric patterns in market movements that may seem random at first glance. Many methods draw on support and resistance level delineated either through channel trendlines, Fibonacci extension or retracement levels, and/or price levels from previous swing low and swing high points. The latter are easy to understand - many investors or traders who may have bought in will decide to sell if the market moves down and undercuts the swing low point that tells the investor to sell and avoid more losses by a series of lower lows. That selling of course will tend to put more downward pressure on the markets. And it's why investors and traders look for higher highs and higher lows before getting very bullish - and lower lows and lower highs for getting more bearish. Once there's a pattern of lower lows and lower highs, for example, then a trendline can be constructed connecting them and it will form a channel - as you can see in the chart below. Price often moves within a channel like this, and if it breaks outside of the channel then it's a signal that something else is happening. That's why I posted earlier today a channel marking where UNG (natural gas ETF) will look more bullish if it can break out and move above the downtrending channel (and other indicators should support it too). On the S&P 500 chart with hourly bars below, I've also added some horizontal lines that represent the "head and shoulders" levels many are now watching, as well as some more near-term swing points. The pullback up may have finished, or it could lead to some more consolidation, but it looks like an early signal that it wants to break out more bullishly would require moving above the 888/900 level.

On my monthly chart of SPX at bottom, I've once again placed some lines - one green, one red - that would go along with two different price paths, depending on which of the predominant Elliott Wave counts might work out. The green one would also be more consistent with the idea of a head-and-shoulders pullback that then provides a buying opportunity for another rally leg up. The red one would retest and break under the March lows (and give me a nice opportunity to suggest an EW expanded flat that I've discussed before for this index). Obviously we won't really get confirmation for quite a while, so swing traders may as well take it slow and keep an eye on how the index moves in the hourly bars as I've suggested with the first chart below.