US Indices Technical Outlook:
- S&P 500 building wedge, could use a little more time to fill out
- Dow of course also building a wedge, points to a sizable move
See where our analysts see the stock market heading in the Q4 Equity Market Forecast.
S&P 500 building wedge, could use a little more time to fill out
The S&P 500 has been a difficult handle in the short-term with momentum having stalled after a strong pop mid-month. The index is currently up against a trend-line running down off the record high recorded during the summer.
The trend-line is making up the upper boundary of a developing wedge formation since the early-June low. The pattern is already becoming clear and could make a break for it, but one more swing lower would help really fill out the pattern nicely, even if the eventual breakout is bullish.
With the S&P up against resistance, risk is skewed towards seeing weakness in the near-term, with eyes on the gap down at 2938 and the underside trend-line off the wedge formation, possibly in confluence with the gap depending on the timing of any decline that may unfold from here.
A breakout above the trend-line will increase bullishness up to the record high at 3028. A break above that threshold is needed, though, to really get the wheels turning towards the January 2018 trend-line and possibly beyond.
S&P 500 Daily Chart (swing lower will fill out the wedge)
Check out the IG Client Sentiment page to see how retail traders are positioned and what it could potentially mean for various currencies and markets moving forward.
Dow of course also building a wedge, points to a sizable move
The Dow has been oscillating in similar fashion as the S&P 500, but slightly weaker in the very near-term as it sits a bit off the highs. The pullback towards tightening up the wedge may already be in progress. On further weakness watch for a swing lower, and how the market might react upon running into the 200-day and bottom-side trend-line of the wedge, they are in approximate confluence. Top-side levels to watch are 27120, 27306, and 27398.
Dow Jones Daily Chart (wedging up)
Dow Jones Chart by TradingView
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
