S&P 500: Tight-roping Support, Time Is Running Thin
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What’s inside:
The S&P 500 is teetering around support
The market needs to soon turn up, risk of failure continues to rise
Short-term view and operating mindset
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In yesterday’s action, the S&P 500 followed through a bit on Friday’s reversal off the mid-2140s, an area the market held as support over the course of a couple of weeks to end September and begin October but recently turned into resistance once breached.
The market is at a crossroads and needs to decide soon what it wants to do. The S&P is teetering around or just below the Feb 11 trend-line (depends on how you have it drawn) and just above the 6/8 high, 9/12 low.
Because the market is trading around a pivotal point and finding it difficult to garner much interest, the feeling on this end is that a rally needs to develop soon or else the market will lose confidence and take another dive lower. If this becomes the case, the first level of support will come in at the lower parallel off the 8/23 high (~2100 at this time), then a lower parallel running back to earlier in the year (~2080).
On the flip-side, if the S&P can get into gear soon (very soon) and find itself above the mid-2140s and firmly back above the Feb 11 trend-line, a rally could start to unfold. But the market will have its work cut out for it until it can chew through the chop-fest over the past few weeks and above the upper parallel off the 8/23 high.
S&P 500: Daily
Created with Tradingview
Bringing the short-term into view: The S&P futures are trading higher in overnight trade, currently treading near a resistance zone and trend-line off the 10/10 swing high. A shove lower off resistance will bring into view the rising trend-line off the 10/13 swing low. The two converging trend-lines may develop into a triangle worth operating off of. If a triangle develops, it would appear most likely a downside break would unfold, but as per usual, we will react to the direction of the pattern breakout rather than predict it.
SPX (24-hr): Hourly
Created with Tradingview
Trades in recent weeks (months) have mostly been best left to those operating with hold times of a few hours to a couple of days. The approach we have found best is taking trades off key levels/lines with the thinking that those trades will need to be exited upon arriving at the next set of levels. Expectations of momentum developing remain kept in check. We continue to view the market with a “taketh what the market giveth” mindset until broader clarity presents itself.
Check out our Q4 forecasts for FX, commodities, and indices.
---Written by Paul Robinson, Market Analyst
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