S&P 500 index price testing downside support target, what’s next?
Our previous technical outlook for the S&P 500 has proven accurate as the index confirms a bearish reversal pattern and approaches key support.
S&P 500 (US 500)
Circled blue we see the bearish price reversal that we were looking for in our previous note did confirm. The overbought signal and bearish volume pattern, in conjunction with the price reversal did well in predicting further downside for the SP500 index, with the initial support target of 5500 now well within sight.
Traders who have been short into the move might now consider locking in profits as we move into oversold territory near support and assess how the price handles the 5500 level.
A downside break of the 5500 level, confirmed with a close, would highlight that we are now making lower lows in conjunction with lower highs i.e. the building blocks of a new downtrend. The next support target below 5500 is considered at 5385. Because of the close proximity of this support level, traders might prefer to see this level broken before confirming this new downtrend. In this scenario a short bias to trades on the index may be preferred going forward.
We will update guidance accordingly should a new trade opportunity present itself. For now, we wait and consider how the price approaches the aforementioned key levels.
S&P 500 (US 500) previous
The SP500 is reaching a pivotal level. The price is rebounding back towards a confluence of resistance around the 200 day simple moving average (blue line) (200MA).
The move higher has pushed the index into overbought territory. The rebound has occurred on declining volume. These are considered bearish indications in technical analysis terms.
For new short positions traders might want to wait to see a bearish price reversal before reaching the 200MA, accompanied by a move out of overbought territory. In this scenario, 5670 and 5500 would consider downside support targets from the move, while a close above the reversal high might be used as a stop loss consideration.
Should the price instead break resistance at the 5825 level, traders might instead wait to see how far the rebound takes the price before assessing a new trading opportunity.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Take a position on indices
Deal on the world’s major stock indices today.
- 1-point spread on the FTSE 100 and Germany 40
- The only provider to offer 24-hour pricing
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only
