What’s inside:
- S&P 500 poised for 2300/20
- Strong push back into consolidation would bring in possibility of a failed attempt to breakout
- Nasdaq 100/Dow Jones techs, targets
To start the week, we took a close-up look at a triangle forming on the ‘right shoulder’ of a continuation-style inverse ‘head-and-shoulders’ pattern; the wedge officially triggered yesterday kicking off what should now lead to an extended move higher out of the six-week-long base.
We’ve maintained a neutral bias for as long as the market remained in a congestion phase, and had this to say on Monday:
“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 to loosen up first, then react accordingly. With the range narrowing (triangle) we should soon see a move towards price expansion.”
Indeed, it appears this may be the case now.
The S&P is poised to rally towards the psychological level of 2300 and measured move target of the inverse H&S continuation pattern at ~2320. Minor resistance lies at the under-side of a pair of trend-lines around 2290/95; one off the Feb low and the other from November. The risk of of a false breakout exists with the market so close to breakout levels. Should the market fall swiftly back inside the basing formation, then we will need to consider this possibility. We’ll touch on that later should that situation develop.
S&P 500: Daily
Created with Tradingview
The Nasdaq 100 has been leading the way higher, and after finally arching over the top-side trend-line extending back to August, it has its eyes set on the upper parallel belonging to the trend-line running up from the Feb lows; it’s in the vicinity of 5170/80. The cleared August t-line will be used as near-term support.
Nasdaq 100: Daily
Created with Tradingview
The Dow Jones needs to clear the 20k mark to break out of its consolidation pattern, but should do so quickly given the posturing of the other indices. The depth of the consolidation points to a measured move of about 300 points, or 20300.
DJIA: Daily
Created with Tradingview
See our Webinar Calendar for a schedule of upcoming live events with DailyFX analysts.
---Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
You can follow Paul on Twitter at @PaulRobinonFX.
