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S&P 500 - Downmove Erased, Record Highs in Sight, Again

S&P 500 - Downmove Erased, Record Highs in Sight, Again

What’s inside:

  • S&P 500 rebounds sharply, trades back above 2380 level and fills gap
  • Should the high get tested or broken, can momentum continue?
  • Fading price swings for quick-hitters the preferred approach right now

Find out what’s driving the stock market in our market forecasts.

In the last update, after the market was walloped on Trump headlines the S&P 500 looked poised for follow-through, but the market had a different idea. Instead of looking towards support levels from back in March and April, we’re now staring at record levels again.

The 2380 level was an important one for a few weeks as the market consolidated just above it following the first round of the French elections. It held on several occasions, and when the market took a hit last week it was sliced through with ease. On Friday, the market attempted to break back above but settled out the week right at the key juncture. So far, this week that key level hasn’t been anything more than an afterthought.

Yesterday, the S&P filled last week’s gap, with the next level of resistance arriving not far ahead at the record high of 2306. Should we see a push to that point or just beyond, can the market continue its recent surge, or will it be a fake-out breakout? Often times indices will breach a key level only to take the rug out from beneath those who most recently entered the market. With that in mind, entries are favored on pullbacks if conditions are right, not chasing breakouts. A rejection off the highs may shift the market lower with range-trading coming into play as general conditions become increasingly unclear. Should we see a move lower our biggest interest will be in how the 2380 level is handled. A hold, and we may see a push back towards the highs; a fold below and the market may be looking to at least probe last week’s low.

Overall, conviction is muted from either side of the tape and favors traders looking to fade levels on rejections with short-term objectives in mind. This will be the preferred tactical approach until the big-picture presents a clear set-up.

Heads up: Later today, the FOMC minutes from the earlier-month meeting will be released. When the March minutes were released on April 5 the market underwent an unexpected bout of volatility. It seems unlikely we will have a redux, but traders need to be prepared regardless.

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.