S&P 500: Support Holds, the Search for Direction Continues
- S&P 500 drops below key 2035 support intra-day, but closes above
- No confirmed signal on the H&S on our radar
- Alternate scenarios could be unfolding, sticking to short-term trading plan
Yesterday began looking like the day we would finally see a clean signal on the head-and-shoulders top we have been tracking in the S&P 500, but it wasn’t to be. To reiterate again, this is why when trading a breakout on any type of pattern, it is best practice that one wait for a closing bar above, or in this case below the trigger point on the time-frame in question. Don’t get caught being the tail of those types of daily reversal bars, wait for the close.
We had 2035 penciled in as neckline support; the low of the session was 2025 near a minor lower parallel and the close of the day was at 2042.
Where do we go from here? We could still sink back below support and stay there, but we will need to wait on that. A strong enough push higher could lead to resistance by way of the top-side trend-line currently residing in the upper 2060s, which also roughly coincides with the earlier week daily peaks at 2072. If this takes place, then the alternate path of a descending wedge forming becomes our next targeted scenario, which like the H&S top is viewed as bearish; especially given the overhead resistance and unfavorable seasonality.
SPX500 Daily: Jan - Present
There is one more alternative at this time. The market could be in the process of building out a bull-flag which dates back to the peak in April. Actually, there is another alternative as well – the market chops around aimlessly for awhile. Not fun stuff for the swing trader, but…
This brings us to a point which has been drilled home on these pages for the past few weeks – This is a quick-flipper’s market. There are decent levels to trade off of for traders who look for opportunities with hold times of 1 to 2-days or less. A clear path will present itself for a swing trade, eventually. But until then, we will taketh what the market giveth.
---Written by Paul Robinson, Market Analyst