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S&P 500 Technical Analysis: Short-term Chart Pattern in View

S&P 500 Technical Analysis: Short-term Chart Pattern in View

2017-01-23 12:10:00
Paul Robinson, Strategist

What's inside:

  • Sideways price action in the S&P 500 continues to point to higher prices at some point
  • Short-term triangle forming on ‘right shoulder’ of H&S formation
  • Awaiting a confirmation break

Trading Guides and Forecasts

Lately, we’ve been looking at the S&P 500 from a daily perspective; making note of the basing price action taking on the shape of a continuation-style inverse head-and-shoulders pattern. The development of this formation is still underway, awaiting confirmation via a daily close above the neckline and the 1/6 high of 2282.

Taking it down to the 2-hr time-frame, the ‘right shoulder’ is taking form as a symmetrical triangle. It’s been under construction since the 1/6 high, finding support at the long-term trend-line which runs back to the 2007 highs. The triangle has developed enough to be considered a valid pattern, but like the inverse H&S pattern it just needs a proper trigger. The validation of both the broader H&S and triangle are in close proximity.

S&P 500: 2-hr

S&P 500 Technical Analysis: Short-term Chart Pattern in View

Created with Tradingview

The triangle could break either way, but given the general consolidation after the power-move higher since November, it’s likely it will break in line with the continuation pattern. However, a down-side break can’t be ruled out, thus why we need to wait for confirmation, in either direction (closing bar above/below top/bottom-side trend-line). A drop below 2254 would raise red flags for the bulls, and a decline below 2248 would likely confirm that the market wants to roll over. A break through the top-side of the triangle, H&S neckline, and 2282 opens up a path towards the psychological level of 2300. The depth of the H&S formation suggests a move to around the 2320 level.

As long as the market stays confined within its recent range, trading will remain tough. Our approach at this time is to wait for the market loosen up first, then react accordingly. With the range narrowing (triangle) we should soon see a move towards price expansion.

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---Written by Paul Robinson, Market Analyst

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