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S&P 500 Technical Outlook: Treading on Confluence of Trend-lines

S&P 500 Technical Outlook: Treading on Confluence of Trend-lines

Paul Robinson, Strategist

What’s inside:

  • S&P 500 trading on confluence of support
  • Consolidation or lower high is the question
  • Watch the DAX, it has a clear-cut technical pattern about to break

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Equity markets have been quiet as of late, continuing to search for direction. Giving trend and support the benefit of the doubt the period since the March 1 top has been constructive, working off overbought conditions without any real bearish price action. The trend-lines off the Feb ’16 and November lows have kept the S&P 500 buoyed; the repeated tests of support make it all the more important in the near-term. A break below, as long as momentum isn’t strong, doesn’t mean the market is no longer consolidating, but will cast some doubt as to whether or not we may see a broader correction, and a possible lower high, lower low sequence develop. It would require a break of the trend-lines and 2353 to add validation to the notion that we are seeing a deeper decline developing.

Keep an eye on the DAX, it has the cleanest picture right now, with a well-developed rising wedge at its apex. It’s not necessarily that the DAX or Europe in general will be the reason U.S. markets make a big move, it’s simply that the German index is offering the cleanest set-up right now. If the DAX makes a sizable move it won’t happen in a bubble.

It’s a quiet week on the fundamental front, with the only ‘high’ impact economic events slated for today when the Fed's George and Mester speak, then Thursday when Yellen will speak, and on Friday when US Durable Goods Orders data will be released. Fed speak might not be very impactful given the proximity to last week's FOMC meeting. For details, please check out the economic calendar.

S&P 500: Daily

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---Written by Paul Robinson, Market Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.