Technical Outlook For S&P 500 Is Mixed

$SPY

The Quarterly chart of the S&P 500 is showing a Bullish-looking Hammer candlestick formation following the V-shaped recovery over the past 3 months.

This sort of price action often leads to a continuation in the trend, which in this case is to the Northside.

But, looking out a little on the weekly see that there is a potential rounded-top pattern in the making.

For this pattern to remain valid, the S&P 500 has to hold below the Bearish trend line around the 2080/90 area.

Apart from this potentially Bearish pattern, the benchmark index has made some lower lows and a lower high.

The Big Q: Will it create another lower high around the Bearish trend lines?

Will wait to see.

Whatever happens, watch the Key support and resistance levels shown on the chart, for if a few support levels start to break down then things could turn really ugly, really quickly like it did on 5 January.

In the event that the S&P fails to hold below the Bearish trend lines then a rally towards the previous all-time high at 2134/5 area becomes likely this Quarter.

What happens next depends on price action around this mark and sentiment at the time.

A hard rejection would create a Double Top reversal pattern, but a clear breakout above the all-time high will be a significantly Bullish outcome because of the length of time the index has effectively spent in about 2 years of consolidation.

If the S&P does break through the Key resistance at the previous all-time high, then expect it to reach the 127.2% Fibo extension mark of the most recent correction, at around 2223.00.

The alternative scenario would be more side-ways trading action inside the large ranges, without creating a distinct reversal pattern South or North.

Not a bad outcome as far as technical trading goes, as it would open more opportunities for both the Bulls and the Bears.

In this scenario, selling near the Top of the range after confirmation and buying near the bottom of the range after confirmation could be a good strategy.

Technical analysis is a method of forecasting price movements by looking at purely market-generated data. Price data from a particular market is most commonly the type of information analyzed by a tech trader.

Stay tuned…

Paul Ebeling

HeffX-LTN