S&P500 Treading Water - Signs of Breakout Near
Updated
Note: I am not a trader, but I am looking to capitalise on further breakdown of the S&P500
After a strong rally, the S&P500 has broken below the lower band of the rally channel, finding support on the 20MA.
The MACD indicates that momentum is decreasing, supported by the last low dipping below the prior high.
As the 20MA (supporting current prices) moves up to short term overhead resistance from previous rally highs, the market will have to choose which way it is to go. In the coming two days we have the 20MA approaching the first resistance level at ~2875. If it decides to respect the 20MA then it wil move towards the upper resistance level at ~2930 where the 20MA will be tested once again.
Upside
A move up through the two resistance levels may see the 3000 level tested, although with the 100MA and 200MA converging on the 3000 level this may pose significant overhead resistance. I am not looking to open a long position at this stage, but may reconsider upon a breakout and retest of the 3000 level.
Downside
A break below the 20MA may see the 50MA tested around the 2700 level. If the 50MA is borken, lower short term support levels may be tested at ~2630, ~2380 and ~2230.
What am I doing?
I see more downside than upside, I will be waiting for a confirmed breakdown of price before taking a short position. I will then watch closely as the 50MA and decide whether or not to exit my position or to keep it open.
Watch for volatility as the US unemployment rate for April is annoucned this Friday.
After a strong rally, the S&P500 has broken below the lower band of the rally channel, finding support on the 20MA.
The MACD indicates that momentum is decreasing, supported by the last low dipping below the prior high.
As the 20MA (supporting current prices) moves up to short term overhead resistance from previous rally highs, the market will have to choose which way it is to go. In the coming two days we have the 20MA approaching the first resistance level at ~2875. If it decides to respect the 20MA then it wil move towards the upper resistance level at ~2930 where the 20MA will be tested once again.
Upside
A move up through the two resistance levels may see the 3000 level tested, although with the 100MA and 200MA converging on the 3000 level this may pose significant overhead resistance. I am not looking to open a long position at this stage, but may reconsider upon a breakout and retest of the 3000 level.
Downside
A break below the 20MA may see the 50MA tested around the 2700 level. If the 50MA is borken, lower short term support levels may be tested at ~2630, ~2380 and ~2230.
What am I doing?
I see more downside than upside, I will be waiting for a confirmed breakdown of price before taking a short position. I will then watch closely as the 50MA and decide whether or not to exit my position or to keep it open.
Watch for volatility as the US unemployment rate for April is annoucned this Friday.
Note
The S&P500 has continued up to the second resistance at ~2930, where it closed on Friday. Price action is likely to continue between 2875 and 2930 at the start of next week. As the 20MA trends up to meet the 2930 level towards the back end of next week we may see the the S&P500 push into higher territory.
The 100 and 200MA have converged on the 3000 level and as I said in the original post, I believe this level will pose significant resistance. Given the state of the US and world, a rise above should be short lived, but i've seen more irrational things happen on the market so let's wait and see.
A failure to break the 3000 level resistance could signal a reversal and may be an opportunity to open a short position.
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