S&P 500/Dow Jones Technical Highlights:
Check out the fundamental and technical forecast for stocks as they rise towards record highs in the Q2 Equity Markets Forecast.
S&P 500 rising wedge triggered with conviction
Last week it was noted that the rising wedge in the S&P 500 was a focal point but needed a convincing break before it could be validated as bearish. The gap on Monday was mostly taken back, however, yesterday that reversal was wiped out with force. This has the S&P firmly outside the formation and looking lower.
The initial target for these patterns arrives near the bottom of its formation, but before arriving at that point the 200-day and a minor swing-low show up around 2775. This leaves a solid 100+ point move until the widely-watched MA is reached. The bottom of the pattern doesn’t arrive until the 2720s, but first we will want to see the market’s reaction to the 200-day should it reach it.
To negate the breakdown, we will need to see some solidly bullish price action and time is likely needed to repair such a break. It’s possible it was a head-fake but given the extended nature of the market and the fact the formation tipped off around the old high suggests it probably wasn’t. For now, running with a bearish trading bias until otherwise.
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 broke)
Dow Jones looking at 200-day as next level
The lagging Dow should reach its 200-day quicker on further selling in equity markets, it only needs to trade down to 25409 to do so. Beyond that support level, next up is the swing-low from March 11 at 25208, which would be an important level to watch as a break below would constitute a lower-low in the upward sequence off the December low. For now, just looking for the long-term MA to get tested and taking it from there…
Dow Jones Daily Chart (200-day looks to be next)
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