S&P 500 Technical Analysis – Consolidation Solid So Far

S&P 500 Highlights:

• S&P 500 consolidating after triangle/trend-line breakout
• 2800+ next objective on a breakout
• A strong drop through bottom of consolidation negates outlook

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When we last looked at the S&P 500 (& Dow) on Friday, the question we asked was, “Is the market consolidating or ready to roll over?” Since then, the market has worked its way sideways, that is, it’s undergoing a period of consolidation. This is also developing after trading above the trend-line off the highs and above the swing-high in April, bullish events in their own right.

Yesterday’s gap-down in the morning was bought relatively aggressively during the afternoon, which further bolsters the notion that the market wants to rally. Given the period of consolidation is going on two weeks, a breakout could come at any time. A move above 2742 should have the market in rally-mode again, with the next level of price resistance not arriving until around 2800, the March swing-high.

Technical events which would derail a bullish outlook – a decline through the bottom of the range or a breakout above 2742 which quickly fails back inside the range, and ultimately back through the bottom of it. In the event either happens, a forceful decline could develop as a bullishly postured market is caught leaning the wrong way.

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S&P 500 Daily Chart (Consolidating)

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX