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S&P 500 and Dow Jones Charts May Be Working Towards Tradeable Formations

S&P 500 and Dow Jones Charts May Be Working Towards Tradeable Formations

What's on this page

S&P 500/Dow Jones Technical Highlights:

  • S&P 500 rising wedge could come into view with bump higher
  • Dow Jones triangle below resistance already becoming visible

Check out the numerous forecasts and educational content offered on the DailyFX Trading Guides page.

S&P 500 rising wedge could come into view with bump higher

The S&P 500 pulled off hard on Friday, but thus far we have yet to see any follow through. Perhaps it comes in the next couple of sessions, or not at all as pullbacks have not led to much more selling since bottoming in December.

If the market can hold the low from Monday at 2785 and forge on higher, then it’s possible a rising wedge formation develops, a narrowing situation more readily visible in the Dow, which we will look at in a minute. A rising wedge after an extended advance is often a sign of a market on the verge of a decline, but of course it will need to fully mature first, then take out the underside t-line of the pattern.

For now, risk/reward isn’t particularly favorable for either side of the tape. Giving general trend the benefit of the doubt, the market looks headed higher but sudden shifts lower like the one seen on Friday can often lead to at the least another stab lower if only a retest before trading higher.

Traders are generally short the S&P 500, find out on the IG Client Sentiment page what this could be for prices moving forward.

S&P 500 Daily Chart (Rising wedge form?)

S&P 500 daily chart, rising wedge formation?

Dow Jones triangle below resistance already becoming visible

The contracting pattern configuration in the Dow leaves a little less to the imagination with a symmetrical triangle becoming increasingly visible. Should it extend to the apex the pattern’s arrival will come at an interesting juncture. The area surrounding 26k has been problematic, and also the top-side of the triangle connects up as a trend-line from the record high in October.

A bullish breakout of a developed triangle would also mean a push through resistance and likely lead to new highs, while a bearish break would confirm the 26k-area as the resistance it has been for the past month, and likely lead to material weakness.

Dow Daily Chart (triangle may develop around resistance)

Dow Jones daily chart, triangle may develop around resistance

To learn more about U.S. indices, check out “The Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities.” You can join me every Wednesday at 10 GMT for live analysis on equity indices and commodities, and for the remaining roster of live events, check out the webinar calendar.

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.