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S&P 500 – Tuesday Sell-off Puts Bearish Price Sequence in Focus

S&P 500 – Tuesday Sell-off Puts Bearish Price Sequence in Focus

2017-03-23 09:33:00
Paul Robinson, Strategist
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What’s inside:

  • S&P 500 slices through key confluence of trend-lines
  • Lower high, lower low sequence unfolding
  • Other global markets look headed lower, too, general risk aversion looks likely for now

New to the markets? See our Trading Guides.

On Tuesday, when we discussed the confluence of trend-lines off the Feb 2016 and November lows, this is what we had to say: 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.”

The break on Tuesday was brutal, and without a turnaround soon – damaging. Yesterday’s bounce was meager, and if weak price action (slow upward momentum) continues for a short period of time, then the Tuesday break will likely prove to be the real deal. Market participants have been conditioned to ‘buy-the-dip’ (BTD), which still may be the way to go. Just that it may be prudent to do so later-on at lower prices.

Getting back to the short-term picture: There is a lower high, lower low sequence developing, which, again, is why a weak bounce would set up for more weakness as another lower high is carved out and the bearish sequence furthers itself along.

An ideal scenario in the short-term for shorts would be for the S&P to attempt to trade back above prior support at 2353/54 and fail to close above on a daily basis.

If the market can hold up and build a descending channel, a bull-flag could develop – a scenario which will take time and one we will delve into further at a later time should it come into view.

Other global markets don’t look so hot, and in the case of the DAX and Nikkei – outright bearish. (More on the DAX here, Nikkei here.) Generally speaking, global markets are setting up for a period of ‘risk-off’ and the S&P is likely to head lower for the foreseeable future.

S&P 500: Daily

S&P 500 – Tuesday Sell-off Puts Bearish Price Sequence in Focus

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---Written by Paul Robinson, Market Analyst

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