- S&P 500 set to decline off top-side trend-line, if it does will add validity as resistance
- Support levels in focus will come into view quickly
- Difficult to buy at lofty levels, a period of consolidation/pullback will pique interest
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The last time we looked at the S&P 500, we were watching for a dip into support as the preferred trading approach, which we got on the final day of May. Since then the S&P has extended into a top-side trend-line crossing over the March 1 peak from a high created in February 2015. It’s initially viewed as minor in significance given not only it's in the direction of the trend but also due to the distance between inflection points (over two years). A hard turn lower, though, would validate this line. The S&P is currently indicating a lower open at the time of this writing (-7.5 handles), so we’ll see if it becomes a gap-down buy or if sellers can come in and push the market solidly lower today. If we see a material red day in the market, then the top-side trend-line will have added weight as resistance moving forward.
Looking lower, there is a trend-line off the May low which will quickly come into view on weakness. Below there is a slope about 15 points lower rising up from November; it passes through last month’s price action, but could still be a source of support on a dip. How the market reacts to it, should it be met, will determine its validity. It’s likely premature to discuss, but beneath there lies the trend-line from November passing under the May low. It would require an aggressive move to get to that point, and at this time the market is still viewed as constructive, of which a sharp short-term move to that point would not be considered constructive.
It’s tough buying at lofty levels. It’s not any easier as a seller. We’ll demonstrate patience and see if the market can digest recent gains through a brief period of consolidation/pullback before looking for an opportunity to join the trend higher. If risk-off starts gripping markets, then we may have to adjust this outlook, accordingly.
S&P 500: Daily
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---Written by Paul Robinson, Market Analyst
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