S&P 500 Technical Update: Levels & Lines to Consider
- The S&P 500 keeps on moving to new levels, but…
- Likely to go through a choppy period of trading
- Support is likely to hold on a first dip lower
In our last post, prior to the Thanksgiving holiday in the U.S., we had this to say about the S&P 500: “The combination of persistent upward pressure, new highs, and holiday trading environment make fighting the trend a difficult proposition. No need here to be a hero." (Meaning, no need to try and find a top.)
Indeed, the market has been persistently higher in recent sessions. New highs often times create a tricky environment, as trading conditions turn choppy with buyers becoming shy at elevated levels, but also lacking any real reason to become aggressive sellers.
The current advance could use some backing-and-filling, which we suspect will take place soon, but at this time we are not looking for downside momentum to become aggressive. On Tuesday, we were looking at ‘hidden’ resistance in the form of a trend-line running over peaks starting back in H1 2015, around 2207, but the S&P on Friday didn’t find issue as it floated on through. Given the longer-term nature of the line, a margin of a few handles above and below needs to be given.
Depending on how one draws it, we are in the territory of the back-side of the Feb 11 trend-line broken last month. Like the 2015 trend-line, this one is only considered minor in nature. The two are near an intersection right now and could reinforce one another.
Obviously, though, it’s difficult to find resistance at record highs. Gravity eventually becomes the biggest form of resistance.
Dip buyers are likely to show up on any initial drop, which will make the old highs at 2194 down to around 2188 our first area of interest. To pique our interest as sellers we will need to see price action tell us a top, even if only temporary, is carving itself out.
S&P 500: Daily
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinonFX.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.