S&P 500/Dow Jones Technical Highlights:
- S&P 500 continues plunge out of wedge, 200-day in sight
- Dow Jones swing-low support near-by, trading around 200-day
Check out the fundamental and technical forecast for stocks as they rise towards record highs in the Q2 Equity Markets Forecast.
S&P 500 continues plunge out of wedge, 200-day in sight
Negative headlines from the U.S./China ordeal keep coming and so do the sell orders. It was a near perfect collision of price pattern (rising wedge) in the S&P 500 and flare up in an ongoing threat to market stability. Yesterday’s plunge brings the S&P only a short distance away from the widely-watched 200-day MA.
While not personally a big advocate of moving averages, the 200-day is one to pay special attention to; big volatility can happen around this important long-term moving average. Given the strong drop off the high it appears probable we will see some type of ‘wash-out’ price action around the average, even if it only results in a minor bounce.
Keep in mind this doesn’t mean a touch, stop, and reverse type of situation is expected, although it certainly could be the case. Just that a powerful reversal is has a good chance of developing somewhere around the MA. Beneath the 200 is the bottom of the rising wedge, so should we see a break of the moving average watch how the 2722 level holds as the base of these type of patterns is known to act as a solid form of support.
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 (200-day MA not far below)
Dow Jones swing-low support near-by, trading around 200-day
The Dow Jones closed the day yesterday not far below the 200-day; one could call it a break but given its relatively close positioning it’s not yet considered a break of significance. The swing-low from March at 25208 is nearby the 200-day, putting support levels in close proximity and increasing the likelihood we could see a slowdown in the decline.
If the S&P hits the 200-day, then the Dow will likely make a lower-low from the March low which on a bounce in the broader market will make the advance an interesting one to watch as the lower-low could be followed up by a lower-high later-on that signals a much larger problem for the Dow. For now, focus is on the S&P and how it handles the 200/bottom of the wedge.
Dow Jones Daily Chart (200-day, March low)
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