S&P 500 Tech Update: Treading Near Record Highs
- Market remains quiet, shaking off the summer rust continues
- Benefit of the doubt is with the long-side until signs tell us otherwise, but…
- One bearish alternative in the S&P 500 could change that with time
On Tuesday, we said the end of the summer is unofficially over as the Labor Day holiday passed to start the week. Experience tells us it typically takes a week or so after for the market to shake off the rust, especially given there are no major catalysts and the market sits perched merrily near record highs. This isn’t making our lives easy as traders, but a pickup in activity is around the corner, so don’t fret.
Moving on to the chart…
Monday we looked at the bull-flag forming within a differing set of angled lines which engulf all the painful grinding price action going back to mid-July. The market inched out of that bull-flag pattern on Tuesday and sits outside of it this morning. A burst through the top-side parallel would have been more ideal, but nevertheless it is difficult to view the market through a bearish lens at this very moment until we see price action suggesting we should do so.
One bearish possibility to keep in the back of your mind, though, should the market stall right here, is a head-and-shoulders pattern. But, again, the S&P will need to turn lower starting very, very soon and not move above the August high at 2194. A lower high could then become the right shoulder of the formation, with confirmation coming on a break of the neckline, which roughly coincides with the lower parallel of the channel in place back to mid-July.
Again, though, given the H&S formation needs some more time to develop and then break the neck-line, there isn’t anything readily suggesting the market will rollover at this time.
For now, we will continue to give the benefit of the doubt to the long-side given the overall bullish trend and current technical structure. A daily close above 2194 should help see the market to the upper parallel (2205/2210) crossing across July/August peaks. A rollover from here towards the lower parallel would increase the odds for the bearish H&S formation scenario.
We will continue to tread waters carefully until volume returns to the market in full force.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX.
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