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S&P 500 - Spinning Its Way Towards a Short-term Top?

S&P 500 - Spinning Its Way Towards a Short-term Top?

2016-04-21 09:51:00
Paul Robinson, Strategist
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What’s inside:

  • S&P 500 neared the upper end of our noted resistance zone (2083/2116)
  • Yesterday’s push/pull price action created a bearish bar formation
  • Looking to the hourly chart for our cue to short, trend-line keeping price pointed higher for now

Yesterday, equity markets spent much of the day grinding higher, with the S&P 500 (FXCM: SPX500) furthering itself towards the top of the resistance zone between 2083 and 2116. It wasn’t until it reached 2011 in the final hour of the cash market session that sellers stepped in and pushed it back down towards where it started the day.

The push-and-pull price action resulted in what some of you may know as a “spinning top”. This candle type signifies a day of indecision with trade above and below the open and close, but closing with no significant gain or loss. It acts as a reversal signal when following a sustained move; such as the past week-and-a-half. It also helps the bearish case with this formation coming amidst significant resistance.

SPX500 Daily: Oct' 15 - Present

S&P 500 - Spinning Its Way Towards a Short-term Top?

Overnight, a push higher has thus far rolled back over from a near touch of yesterday’s high. (Potential lower high scenario as discussed yesterday.) This has brought the S&P down to a trend-line rising from the 4/18 pivot. If broken, then the before mentioned candlestick will more likely than not be confirmed and lower prices will ensue. If, however, we hold onto the trend-line, then another scenario could unfold; a rising wedge into daily resistance at 2116.

In either event, the trend-line off the 4/18 pivot is an important one in the near-term. A break below would open up the door for a retest of the top-side parallel successfully tested yesterday around 2092/93 (which is right near yesterday’s low). Further weakness below 2092 brings in the 2085/87 area, where the 4/14 peak lies, as well as the lower side of a rising channel. If th 4/18 t-line holds, then the short-term bias remains tilted slightly higher for now.

Hourly: April

S&P 500 - Spinning Its Way Towards a Short-term Top?

For now, again, watching the 4/18 trend-line as our que for initiating a short position. In light of the extended nature of the market and daily reversal bar type, no interest exists at this time for establishing a long position until we have seen a pullback and hold of lower support levels.

Find out what the #1 mistake traders make.

---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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