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S&P 500/Dow Jones Technical Highlights:

  • S&P 500 rising wedge triggered with conviction
  • Dow Jones looking at 200-day as next level

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)

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)

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.

Tools for Forex & CFD Traders

Whether you are a beginning or experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX