S&P 500: Whipsaw Price Action Dominates, Waiting for Clarity

What’s inside:

• The S&P 500 continues to whipsaw
• Another false breakout nearly took place, but market maintained support by day’s end
• A couple of different scenarios could unfold, difficult to say which, will stand aside until it becomes clear

In yesterday’s commentary, we discussed the boring environment we are in now and the false breakouts and breakdowns which are taking place with volatility low and seasonality unfavorable for sustained moves without a strong catalyst (risk-off). Trading volumes in general are light, and so should ours.

With that said, let’s move on to yesterday’s price action, because it started to happen, again. The S&P 500 dipped back below the 2174/78 support zone (top of prior range), making another false breakout look increasingly likely, but a late-day bounce pushed the index back into the support zone, settling at 2176. So far, though, it was a false breakdown of a false breakout. Got that?

As we said on Wednesday, the benefit of the doubt is still with the overall bullish tone, but the scale is not tipped that far in favor of the bulls. Looking at the short-term charts, a possible lower high, lower high sequence could be developing. If it is to happen, then today we would likely see it resume towards another lower low with the S&P currently pressing the top-side of parallel resistance.

The developing sequence, even though it drops back inside the range, could end up developing into a bull-flag with a little more time and the absence of any significant selling pressure.

A lot of 'could be' price action at this time. And with that, we will wait for a better look before making any commitments.

Hone your techical skills and check out one of our free trading guides designed for traders of all experience levels.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.