S&P 500: Short-term Technical Outlook
- Looked at broader view yesterday, short-term in focus today
- Trend is obviously higher, but overbought in short-term
- Using technical structures on hourly chart as near-term guide
Yesterday, we took a look at the big picture view in the S&P 500, pointing out a potentially bearish price sequence in the form of a reverse symmetrical triangle appearing at record highs.
We also noted that buying pressure looked exhausted in the near-term with an extremely high number of stocks in the S&P 500 trading above their short-term, 10-day moving average. On Friday the figure was 96% (highest since 2011) and yesterday it was at 94%.
Conditions are ripe for a pullback in the near-term, at the least. It may be shallow, or it could turn out to be something more sinister as we suggested could happen in yesterday’s commentary. It will take some time to gain further indications as to whether the latter will become the more likely scenario.
Let’s take a look at the hourly chart: At this time, with the market trading in record territory there is no actual horizontal price levels which act as resistance, obviously. There is a top-side trend-line at this immediate moment extending back to the 7/4 peak which could help contain further momentum today. Just below, is the parallel of the top-side trend-line which crosses under lows made yesterday and today. This small channel will be used as a short-term guide. Stay within or above, then market will remain firm to higher. Drop below and a larger short-term decline comes into play.
A break below the channel will put the ‘Brexit’ high at 2127 into focus and not too far below there, the rising trend-line off the 6/27 low. The two angles of influence could very well collide with another, strengthening the 2127 level. A decline below both technical markers would open the door up for a move to the 7/4 high at 2112 (highly unlikely we see this level today without a major catalyst).
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---Written by Paul Robinson, Market Analyst