S&P continues to trade sideways between the 1885-1840 price range. Despite several stocks showing reversal signs of weakness and several stocks making downward corrective moves during the last two weeks, the index continues to challenge the all time highs area at 1880-85 but every time it reverses lower without being able to close above that resistance area. Despite the strong reversals from 1880-85, buyers still support S&P as any move towards 1830-40 is engaged by buyers who manage to overcome selling pressures and push the index back above 1860 which seems to be a pivotal price level. Yes the index is supported and continues to make higher lows, but we do not see a higher high above 1885 in a daily close. This looks like a top forming around 1880 with volume much higher near the highs than near 1840-50.
The decline from 1884 looks impulsive and the upward bounce has been stopped near the 61.8% Fibonacci retracement. Volume is increased near the highs but bears will need more signs of weakness before committing to the bearish case. Our view prefers the scenario that April will find equity markets making a considerable downward correction. The weakness signs we are looking for start with a break below 1849.
Breaking below this level will trigger a Head & Shoulders pattern that could bring the index towards 1820-1800 support. If however we see the index break upwards above 1880 we should expect 1910-20 to be challenged. I do not think that the market is going to delay the next big move. Soon we will have a new short-term trend. That is why we prefer to be neutral and wait for a reliable signal to be given.
I still believe that the market could move lower towards the 50% or 61.8% retracement of the rise from 1737. Important support is found at 1770. Currently bulls have the upper hand as the index is supported and there is no daily close below 1840. In this trading range I prefer to remain neutral and sell near resistance and buy near support, with stop reverse orders pending. If you want to follow my detailed analysis real-time for the major European indices and S&P, try our new services for only 34.95$ per month.
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