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S&P 500 Analysis for Short-term Traders: Possible Pattern Set-up

S&P 500 Analysis for Short-term Traders: Possible Pattern Set-up

Paul Robinson, Strategist

What’s inside:

  • S&P 500 continues to hold steady on June slope, keeping the market pointed higher
  • Bearish pattern beginning to come into view on the hourly chart
  • Formation may not lead to a sharp decline, but at least provide traders with a little volatility

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Last week, we noted the bearish engulfing bar which took shape in the S&P 500 on Monday and its potentially bearish implications. Which proved to be correct…for an entire day-and-a-half. Broadly speaking, it has paid those who just follow along with the trend, because pullbacks with any meaning have become non-existent. The upward grind has generally been unkind to the short-term trader in terms of providing volatility, and that very well may continue on through the end of the year.

The once top-side June trend-line has become a solid source of support since crossing it a month-ago. Last week it was broken by a fairly wide margin on an intra-day basis, but the market still managed to close above. Yesterday, we saw another successful hold on an intra-day dip. We will continue use this line as a steadfast line of support for as long as it holds.

S&P 500: Daily

S&P 500 Analysis for Short-term Traders: Possible Pattern Set-up

For as long as it holds…

There is one bearish possibility beginning to show its face. It’s one which we talked about yesterday in a webinar on classic technical patterns. It will take a little more time, like maybe Monday or Tuesday, before its fully matured, but a rising wedge is coming into view. Its development is coming after an extended move and the narrowing upward price swings may be close to corralling the bulls over the edge. A break would of course immediately bring into play the June slope, but with these patterns often leading to swift reversals it may be the first time in over a month it doesn’t hold. The target would be support around 2544/40, and that may be about all we get…it’s a bull market, after all.

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S&P 500 Analysis for Short-term Traders: Possible Pattern Set-up

Bottom line: It’s paid to be a bull, but there is potential for the short-term trader to take a bite out of the market from the short-side if the current sequence matures into a rising wedge and breaks the lower trend-line. This would at least bring about a spat of volatility, and at this point, any volatility is welcomed. It may also lead to the next good ‘dip-trip’ opportunity for longs.

---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.