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S&P 500: A Look at the Short-term Chart-scape

S&P 500: A Look at the Short-term Chart-scape

What’s inside:

  • 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.

What separates successful traders from the rest? Find out in our free trading guide, “Traits of Successful Traders”.

---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.