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S&P 500: Chop Continues, Short-term Chart in Focus

S&P 500: Chop Continues, Short-term Chart in Focus

Paul Robinson, Strategist

What’s inside:

  • Thursday/Friday bounce put S&P 500 back into the thick of the chop
  • Trend remains lower looking out over the short-term
  • Until the sequence of lower lows, lower highs is broken, shorts favored

On Friday, the S&P 500 made good on the Thursday reversal by following through and pushing back into the thick of the ongoing chop. From a swing-trader’s standpoint, looking out beyond a few days, the trading environment the past couple of months hasn’t been particularly friendly, however; if your strategy entails taking short-term swings of 1-3 days, then price levels and other technical developments have offered decent set-ups for the nimble.

Given the chop looks primed to continue on into this week, we are going to turn our focus back to the short-term charts. The trend since the April 20 peak has been lower, albeit not the cleanest. The series of lower lows and lower highs continues, and until there is a break in this trend we will remain most interested in shorting failing rallies and buying back those positions on weakness.

Given the current technical structure, the best entries from this seat are reserved for scenarios where clear resistance is reached, whether it be a trend-line or a horizontal price level, followed by rejection back lower. Not only does this enhance our chances of moving in line with the path of least resistance, but it also provides a reference point from which to assess risk. In this case, since operating from the short-side, stops can be placed a few points above the swing high.

At this time, horizontal resistance in the upper 2050s and a trend-line running back to the May 10 peak offer a situation where one can establish a short should we see a solid rejection back lower. An alternate version of the top-side trend-line is slightly higher just over 2060.

Should we establish a trade, we will look for the S&P to carry back lower towards the most recent low at 2025 and possibly lower.

If upward momentum carries the S&P beyond the 5/20 trend-line, the one coming down off the 4/20 high is up next, and marks a more important one on the daily chart. This currently clocks in around 2067. Beyond there, the last line before the series of lower highs/lows comes under fire is at 2072.

SPX500 Hourly

S&P 500: Chop Continues, Short-term Chart in Focus

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---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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