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S&P 500 Technical Analysis: Symmetrical Wedge Highlights Congestion

S&P 500 Technical Analysis: Symmetrical Wedge Highlights Congestion

James Stanley, Senior Strategist

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Talking Points:

  • S&P 500 Technical Strategy: Flat
  • S&P 500 continues to congest ahead of FOMC on Thursday.
  • Breakout of symmetrical wedge could define positioning for future positions.

The S&P 500 continues to congest within a symmetrical wedge, and as we identified last week this continued congestion could be a sign of ‘something larger.’ Standard breakout logic should apply as the S&P is continuing to carve out both lower-highs and higher-lows.

Breaks of resistance at 1,995 could open the door for long positions up to 61.8% Fibonacci resistance at 2,021, prior price action support of 2,040 and then 76.4% Fibonacci resistance at 2,065.5.

Alternatively, breaks of support at 1,905 could be treated bearishly with targets cast at 1,886.5 (23.6% Fibonacci retracement of the ‘secondary move’ from October 2011 to the May 2015 high), 1,833.5 (the 8/24 ‘panic’ low), 1,819 (the October 2014 low), and then 1,791 (the 23.6% retracement of the ‘major move’ comprising the financial collapse low to the May 2015 high).

Because of the short-term nature of this symmetrical wedge, traders should hold certain to their entry and stop levels, as whipsaw ahead of the Fed could provide numerous opportunities for false breakouts.

Ahead of the Fed – the probable move would likely be lower given the economic concerns from Asia, and the fact that additional-Asian weakness could bring US stocks lower as we near FOMC. As we get closer to Thursday, that probable move flips to the up-side as the Fed has had a tendency to stoke US stock prices higher with commentary and policies of support.

--- Written by James Stanley, Analyst for DailyFX.com

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Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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