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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 Down but Not Out (Yet), S&P 500 Eyeing 200-day

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)

Dow Jones Down but Not Out (Yet), S&P 500 Eyeing 200-day

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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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