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S&P 500 - Breaks Bearish Short-term Price Sequence

S&P 500 - Breaks Bearish Short-term Price Sequence

Paul Robinson, Strategist

What's inside:

  • 2040 held well following another 'fake-break'
  • Bearish sequence within downward channel (bull-flag) breaks
  • Bias titled higher, but major resistance zone lies ahead

The critical support area we’ve been discussing around 2040 in the S&P 500 (FXCM: SPX500) held on two more occasions yesterday after a second ‘fake break’ below on Monday, with the latter hold coming during the important cash session. Not only did it hold, but the market rallied smartly off this level through the remainder of the day and thus far continues in the early US morning hours.

The boost higher now has the index well above the top-side trend-line of the downward channel (bull-flag) we have been using as a guide for trades from the short-side. The sequence of lower highs and lower lows was broken in the process.

We said the past couple of days a bull-flag was potentially developing, but felt there was more work to be done on the down-side before breaking higher. In less than 24 hours, price action has quashed the notion of seeing lower prices within the context of a broader building bull-flag. Given the trend lower has now tilted upward out of the bull-flag, so has our short-term trading focus as long as we don’t see a sharp dip back beneath the top-side parallel.

Resistance comes in by way of the 4/4 high at 2079, which lies just ahead. Beyond that peak the market will be entering into a zone of resistance between approximately 2080 and 2115. This zone is made up of the multiple highs created from November through December and the trend-line running down off the May 2015 record highs. (2083,2086,2106,2116.) The market challenging multiple points of resistance within close proximity to one another is likely to keep trading fairly choppy, but still tradable with the right plan. We continue to take the approach of initiating trades with hold-times of 1 to 2 days. Buys are favored on dips only, while shorts will require touches of resistance and a turn lower in momentum.

SPX 500 Daily/Hourly

S&P 500 - Breaks Bearish Short-term Price Sequence

Looking for real-time sentiment data? Check out our SSI Index created for measuring trader sentiment in various currency pairs and CFDs.

---Written by Paul Robinson, Market Analyst

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

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

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