S&P 500: A Look at the Short-term Chart-scape
- The S&P 500 breaks wedge, but not support
- Tough summer trading environment with volume and volatility low
- Trend remains higher, but one possible bearish formation could develop
In the latest commentary regarding the S&P 500 we took note of the downside break in the wedge formation which had been developing since the beginning of the month. Despite its bearish implications we wanted to see a clean drop below all near-term support levels, including the 8/10 low at 2171, before feeling comfortable from the short-side. While on 8/17 the S&P broke below 2171, it was only for a very short period of time before recovering back above.
It remains a difficult environment for traders on all time-frames. The very slow upward grind which began in the middle of July looks likely to continue in the short-term without a major catalyst as the summer vacation period winds down.
The general trend is higher, so we must respect that for now until we see a meaningful break in price and sentiment.
One possible bearish short-term development to watch is the development of a head-and-shoulders pattern. However, trend-line support from the 8/2 low comes in prior to the pattern triggering (break below 2167), which helps keep the trend pointed higher as long as the S&P remains above.
The best strategy at this time appears to be quick-hitter scalps off horizontal and sloping support levels until volume and volatility move back into the market.
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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.