- S&P 500 rising wedge broke, but consolidation may be as bearish as it gets from here if no turn lower again soon
- Dow Jones carving out a possible H&S top, but could also be a consolidation pattern
- Market participants look likely to be best served being patient and waiting for a bit more clarity to present in the days ahead
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Last week, when we looked at U.S. indices, the S&P 500 and Dow Jones were both flashing signs of a forming a ‘mini-top’. Not the top, but a top which could lead to a minor pullback. Since then, we’ve seen a little bit of a decline, but is has been anything but a clean process and smacks more of a consolidation sequence so far.
The S&P 500 rising wedge break is still in play, but about to come off the board given how close the market is to a new high. If we are to see a turn lower, it needs to develop very soon. The June slope, which held as support on several occasions since last month (most recently on 11/14), was broke for a day (11/15) before being recaptured yesterday. Indeed, things are becoming sloppy. The thinking on this end, is that it would be best to see a nice horizontal period of trading, or consolidation, before breaking out into year-end. But we’ll see if the market wants to cooperate.
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S&P 500: Daily
The Dow isn’t presenting us with much better clarity than the broader S&P, but does have one potentially bearish price sequence taking shape in the form of a ‘head-and-shoulders’ pattern (Most easily visible on the hourly time-frame.) The Dow will need to turn down right about now and subsequently break the ‘neckline’ before we have validation, but it’s a scenario worth keeping in mind. Price action could just continue to move sideways, too, and a healthy period of consolidation take shape. As said a minute ago, that could be a good thing for setting up a long-trade later.
The bottom line: The market is still extended and generally choppy. There isn’t likely to be a tremendous amount of momentum showing up in either direction, and traders will need to continue to pick their spots wisely, or stand aside all together until clarify presents itself.
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---Written by Paul Robinson, Market Analyst
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