S&P 500: The V Continues, Familiar Inflection Point at Hand
- The S&P 500 continues its V-shaped recovery, ripping through levels
- An old inflection point (2083/87) is upon us once again
- How the market reacts around this area of resistance will provide short-term indications
The title of yesterday’s commentary was, “Bounce or Something More Meaningful?”. It was noted that a bounce was looking like the more probable scenario, also the wrong one. The S&P 500 has put on a V-shaped recovery, tearing through one resistance zone after another; 2020/25, 2040/50, and 2068/70.
At none of those points did the market show any letting up, giving no real indication one should short. This brings us to an area of influence which was in play for on numerous occasions going back a month; 2083/87. In afterhours trade yesterday, the futures carried the SPX500 up to 2083 before pivoting back lower. As the US cash session approaches (930 EST/1330 GMT) the market is on a move back towards this critical inflection point.
For short-term traders looking to establish a short, the 2083/87 inflection zone might provide a trade should the market respond to it by rejecting it when volume is at its highest during US hours. Or, it may continue to push on through, and in that case it would be prudent to stand aside and let the momentum continue.
It’s tough at this point to chase momentum with fresh longs given the sharp rise in such a short period of time, and with another level of resistance at hand. But, if resistance is cleared and holds on a pullback then an opportunity to join the current thrust higher could present itself, with in mind the market may continue to ‘V-line’ it back to where the sell-off originated from pre-Brexit; similarly to how the FTSE 100 has already wiped out all of its losses, and then some.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.