US Indices: S&P 500/Dow Turn From Resistance, Hourly Chart in View
- Multi-month trend structure negative, but room to run to resistance, however...
- Looking for a pullback in the S&P 500 towards support
- Broader bullish back-drop makes this a 'hit-and-run' situation
Market short-term overbought bodes well intermediate-term
Last week we discussed how breadth and price momentum in the market had become pushed to extremes which were considered overbought, but the market didn’t react negatively to those conditions. Instead, overbought became more overbought. This was a sign of changing character, marking an appetite for stocks not seen since in quite some time. This doesn’t provide an ‘all-is-clear’ signal to buy stocks with reckless abandonment, but the persistent short-term upward pressure coming from a multi-month low does bode well when looking out over the intermediate-term.
However, a pullback is in order at this time
The S&P 500 and Dow both ran right smack-dab into the middle of major resistance on Friday and struggled. The 2000 area in the S&P has acted as support and resistance on numerous occasions in the past. The resistance area of comparison in the Dow exists surrounding the 17000 level.
Shorts favored at the moment, but edge will quickly disappear
From a broader standpoint the market is at critical resistance and overbought, setting up the stage for a minor pullback at the least. At the time of this writing, heading into the North American session, the S&P 500 futures (&CFD) are breaking down out of a small rising channel on the hourly chart. The turn lower from resistance and break of a small rising technical formation provide underpinnings for an early week pullback. The target in the short-term is the rising trend-line off the 2/11 low and 1970 area. We don't have a lot of interest at this time in overstaying our welcome from the short-side given the overall positive developments in place. So, this will be a 'hit-in-run' type of situation from the sell-side.
S&P 500 Hourly/Daily
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---Written by Paul Robinson, Market Analyst
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.