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US Indices: S&P 500 and Dow Reaching Top-side Objectives, Now What?

US Indices: S&P 500 and Dow Reaching Top-side Objectives, Now What?

2016-03-03 10:58:00
Paul Robinson, Strategist
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What's inside:

  • Upside resistance in S&P 500 and Dow nearly upon us
  • Offloading longs into resistance, watching for a reversal
  • A trade from the short-side could soon develop

We are now closing in on what could prove to be a pivotal spot for the markets, as both the S&P 500 and Dow move into major overhead resistance zones. Earlier this week we discussed our upward bias and the levels in focus.

Upside levels in review, almost there

Areas of interest as discussed yesterday. The objective for the S&P 500 is for it to reach into the 1990-2010 area; the Dow has resistance between roughly 16935 and 17100; the Nasdaq 100 does not have any clearly visible levels until between 4450 and 4500 (200-day @ 4428). The former two indices are a day’s worth of work away, but the Nasdaq 100 will not likely make it to its comparative resistance zone without the broader S&P 500 first running into trouble around 2000.

S&P 500 Daily: Aug '15 - Present

US Indices: S&P 500 and Dow Reaching Top-side Objectives, Now What?

Resistance offers a spot to offload long positions

Selling into resistance as is buying into support are good policies in the long-run. With that said, offloading current long positions into a steadfast resistance zone makes sense on this end. If wanting to hold onto a chunk in hopes of moving on through, or if you have a longer-term time horizon and higher price objectives, then at least tightening up trailing stops sounds like a good plan.

Watching price action at top-side levels

For ‘would-be’ shorts, something should soon develop. We have resistance identified, but don’t yet have the price action warranting an entry. In fact, given the momentum and our location at the bottom of the resistance zone, there is still some room to propel higher before seeing momentum wane.

Once it does, though, we will be watching to see how it unfolds. A strong rejection is preferred, validating the previously outlined resistance levels. Given the number of inflection points, especially in the S&P 500, probability sides with the market at least pulling back a little.

I’m still sitting in the camp at this time which believes we will see some more follow-through down the road, but the pullback off major resistance could be a juicy trade before the upward trend reasserts itself.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX, or email him directly at instructor@dailyfx.com with any questions, comments, or concerns.

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