S&P 500 Technical Outlook: SPX500 Rally at Key Resistance Hurdle

2020-05-05 17:00:00

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S&P 500 Index Technical Price Outlook: SPX500 Near-term Trade Levels
S&P 500 Price Chart – SPX500 Daily
S&P 500 Price Chart – SPX500 120min
S&P 500 Trader Sentiment – SPX500 Price Chart
Active Trade Setups

S&P 500 Index Technical Price Outlook: SPX500 Near-term Trade Levels

S&P 500 Index updated technical trade levels & sentiment – Daily & 120min Charts
SPX500 recovery testing critical resistance barrier- bulls at risk while below 2930s
What is S&P 500? A Guide to the S&P 500 Index

The S&P 500 Index surged nearly 4% off Monday’s low with the advance taking price back into a critical resistance zone we’ve been tracking for weeks now. These are the updated targets and invalidation levels that matter on the SPX500 technical price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this S&P 500 trade setup and more.

S&P 500 Price Chart – SPX500 Daily

Chart Prepared by Michael Boutros, Technical Strategist; S&P 500 Index on Tradingview

Technical Outlook: In my last S&P 500 Price Outlook we noted that the SPX rally had, “extended into a pivotal resistance barrier and the immediate focus is on a reaction up here with the bulls at risk sub-2930 near-term.” A false breakout on April 29th quickly reversed with the index pulling back into the 23.6% retracement of the mid-March rally at 2786 before rebounding.

The recovery is now once again approaching critical resistance at 2890-2932 – a region defined by May open, 100% extension of the advance off the yearly low and the 61.8% retracement of the 2020 range. A breach / close above this threshold is still needed to unleash the next leg higher in SPX towards the August 2019 highs at 3026. A break below Fibonacci support would risk a larger price correction with subsequent objectives at 2670.

S&P 500 Price Chart – SPX500 120min

Notes: A closer look at S&P 500 price action shows the index approaching initial resistance here at the Monthly open / 61.8% retracement of the recent decline at 2890/98- look for a reaction here today. A breach keeps the focus on proposed pitchfork resistance / 2018 high-day close at 2929/32- near-term bearish invalidation. Initial support steady at 2818 with a break below 2777/86 needed to fuel the next leg lower in price.

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Bottom line: The S&P 500 rebound is approaching key resistance at a range which has already offered a false breakout- use caution here. From a trading standpoint, a good zone to reduce long-exposure / raise protective stops – look for possible topside exhaustion while within this formation / sub-2932 IF price is heading lower with a break of the weekly opening-range lows to validate a larger correction. Ultimately, a breach / close above would be needed to mark resumption of the broader uptrend.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

S&P 500 Trader Sentiment – SPX500 Price Chart

A summary of IG Client Sentiment shows traders are net-short the index - the ratio stands at -2.63 (27.58% of traders are long) – bullishreading
Long positions are 6.70% higher than yesterday and 15.15% higher from last week
Short positions are 6.24% lower than yesterday and 2.12% lower from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. From a sentiment standpoint, the recent changes in positioning warn that the current S&P 500 price trend may soon reverse lower despite the fact traders remain net-short.