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S&P 500: When Will It Crack?

S&P 500: When Will It Crack?

2016-05-18 10:42:00
Paul Robinson, Strategist
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What’s inside:

  • Support continues to hold, 2035 becoming very pivotal
  • Alternate descending wedge becomes probable on swing back higher
  • Short-term game-plan the same – quick flips until broader clarity

It looked as though yesterday afternoon selling would lead the S&P 500 (FXCM: SPX500) through the neck-line we have been discussing, but buyers stepped up at this critical juncture of support. That has been the story of recent; a game of ping-pong between the bulls and bears.

A clean daily close below the May 6 low at ~2035 (CFD price) should set into motion a strong push lower, as the H&S pattern will officially have triggered. In overnight trade, the futures are relatively flat as we head towards the day session.

If the market swings higher from support towards the top-side trend-line in the upper 2060s, then the alternative scenario of building out a descending wedge becomes more probable. This alternate, with its lower highs, flat bottoms, is also likely to have the same outcome as the H&S – a sell-off. But we will first need to see a close below 2035 before that scenario can also be validated, as this will put the S&P below the neck-line and all recent swing lows. So, the bottom-line is: 2035 is beginning to matter, a lot.

To answer the question, “When will it crack?”: When (if) 2035 goes from old support to new resistance.

SPX500 Daily

S&P 500: When Will It Crack?

The game-plan remains the same for short-term trades – sell bounces on rejections at resistance, buy weakness into support once a turnaround in momentum is present. Once we see a resolution from the recent gyrations, then we can look to establish a position with a hold-time longer than a day or two.

Find out what separates profitable traders from the unprofitable; one of the keys is good risk/reward, find out what some other factors are - here.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter @PaulRobinsonFX, or email him directly at instructor@dailyfx.com.

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

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