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S&P 500 Technical Outlook: Wedge Breaks

S&P 500 Technical Outlook: Wedge Breaks

Paul Robinson,

What’s inside:

  • The S&P 500 breaks below lower trend-line
  • But needs to clear through some support at hand before momentum can kick in
  • Expectations for strong moves remains low during summer trading environment

The last time we discussed the S&P 500 (on Friday), we were focusing on the funneling price action unfolding towards the apex of an ascending wedge. After making one more push to another record high on Monday, the S&P pulled off the top-side of the wedge, and as of yesterday it broke the bottom-side trend-line of the contracting pattern. This tentatively exposes the market to further losses, but we will need to see a drop below the 2178/74 zone (top of the previous range) and the 8/10 low at 2171 before momentum can kick in. Those levels until broken, remain support.

On a break, though, it won’t be long before another area of support comes into focus around 2155/60, with the lowest pivot over the past month coming in at 2147.

Things are ‘tight’ right now. Our confidence level in seeing anything with strong momentum at this juncture is low; it’s turning out to be one of those low volume, low volatility August trading environments we’ve been discussing as of late. With that said, we need to continue to be careful as the risk of the market providing false signals is high.

However, even though the trading environment isn’t the most ideal there are still opportunities to take advantage of, just in smaller doses.

Hone your skills as a technical trader by taking a look at some of our free trading guides.

---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.