S&P 500: Current Landscape Warrants ‘Wait-and-See’ Mode
- Back to business as usual, S&P 500 starts week with its work cut out
- Resistance levels at hand from 2100 to 2116
- ‘Wait-and-see’ mode, watching how market responds at current juncture
Today, it’s back to business as usual following the Monday off in the U.S. for observance of Memorial Day. The last time we chatted up the S&P 500, it was noted that further gains in the short-term could be difficult given its extended state into critical overhead levels.
Ahead of the long weekend, there was no reversal of the earlier week strength, but as this week begins the market faces some key challenges ahead.
The trend-line coming off the 2015 all-time high has yet to have an impact on keeping the S&P suppressed, which brings us to 2100 and then the area between 2111 and 2116 on further strength; 2016 peak and Nov ‘15 highs, respectively. In yesterday’s limited holiday trading hours, the S&P futures traded above 2100, but given how light the volume was we will focus on it from Friday where it closed right at about 2100.
Even with resistance in the neighborhood it is still tough to be bearish without first seeing a material reversal in momentum. At the same time, without a consolidation or constructive pullback, it is risky business to buy strength at these levels.
This puts us in wait-and-see’ mode, looking for further clues before initiating any type of trade beyond a day-trade. If we see a further advance into resistance and a sharp reversal, then we may look to take a trade to the down-side, with in mind a double-top or broader range could be developing. However, if the market can digest its recent gains without falling apart, then looking for a continuation trade from the 5/24 bull-flag breakout may be the way to go. If this is the case, then we will be looking for an advance towards the old record highs at 2137 on clearance of before-mentioned levels.
---Written by Paul Robinson, Market Analyst