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S&P 500 Technical Update: Short-term Wedge Building

S&P 500 Technical Update: Short-term Wedge Building

2016-09-20 11:58:00
Paul Robinson, Strategist
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What's inside:

  • The S&P 500 forming an ascending wedge in the short-term
  • Market still searching for direction when looking more broadly
  • BoJ and more importantly FOMC tomorrow

The S&P 500 bounced around yesterday, attempting to push higher (found resistance in low 2050s) then pulled back to find support on the lower parallel off the 9/14 swing low. The push-pull between horizontal resistance and rising support is creating an ascending wedge.

The ascending nature of the wedge suggests an upward break will eventually take shape with the higher lows showing an increase in interest by the market at loftier levels, but we must wait for a break before running with the pattern.

A break higher will quickly find the S&P up against a resistance zone in the 2155/63 zone, possibly stalling and foiling the formations potential. A break through resistance and the S&P could be on its way to joining the Nasdaq 100, which is pressing up near old record highs.

A downside break leaves room for a move to the trend-line off the 9/11 low, and possible further develop a symmetrical triangle.

S&P 500 Technical Update: Short-term Wedge Building

Overall, the bounce since the swoon on 9/9 has been fairly lethargic, and price action more broadly speaking, beyond the near-term ascending wedge, has been contracting. The contraction is indicative of a market on the verge of making a break for it one way or another.

Which brings us to our potential catalysts.

The BoJ will hold a policy meeting in the early hours of tomorrow. More importantly, though, today kicks off the two-day FOMC meeting, with tomorrow as the day of decision/policy statement/Fed projections for rates. The market is not expecting a change in rates at this meeting, but will be focused on any clues as to whether the December meeting will be the next likely time the Fed ratchets rates for a second time since last December. It’s not the outcome we are most interested in as technical traders, but rather the reaction.

Find out the #1 mistake traders make in our guide, “Traits of Successful Traders”.

---Written by Paul Robinson, Market Analyst

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