S&P 500: Choppy Trading Leads Market Towards Intersection
- Market swinging between points of technical interest
- Still tracking the H&S formation, but…
- Keeping trades short-term off key levels until further clarity presents itself (i.e. - neckline break)
Yesterday, after the market gapped higher on the cash open it quickly sold off, with the Nasdaq 100 falling particularly hard (unsurprising, it’s been the weakest of the bunch). The low of the day in the S&P 500 (FXCM: SPX500) came at a trend-line running off the Feb 11 re-test low which connects to the recent May 6 swing low. Typically, given the extended distance between the two points and a touch occurring (yesterday) so quickly to the second connecting point, I don’t consider the trend-line to be of sizable significance. However, since the market responded to the line it matters, for now.
The ‘head-and-shoulders’ topping formations in the S&P 500 and Dow are still working themselves out towards possible completion; neither index should violate the recent swing highs on a daily closing basis at 2085 and 17932, respectively, for the right shoulders to maintain their shape.
The S&P is caught between intersecting lines – topside trend-line off the 4/20 peak and the now responsive trend-line off the 2/11 low. At the time of this writing, the SPX is trying to work its way below. Beneath the trend-line will bring into play the neckline of the H&S formation which falls right around the 2035/37 area.
S&P 500 (SPX500)
For now, we will use these levels/lines as our short-term guides for support and resistance, and play off them accordingly. At this time, interest lies more in being a seller, but should the market act well around support, then perhaps picking up one of the indices for a bounce will be in order. Until further clarity (i.e. – break of H&S neckline) all trades will continue to be very short-term in nature.
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---Written by Paul Robinson, Market Analyst