Technical Update: S&P 500 Confirms Bullish Outlook
Yesterday (May 9), the NASDAQ’s short-term outlook shifted to bullish. Earlier, on Tuesday, the DJIA was on the verge of breaking above several key resistance levels – levels, which were all broken to the upside the following day (yellow and orange trendlines in Figure 1 and blue trendline in Figure 2). Today, the S&P 500 provided further indication that U.S. indices are headed higher in the short- to intermediate-term.
Figure 1. DJIA Daily Chart
Figure 2. DJIA Daily Chart
- Today (May 10), S&P 500 broke above its January – March resistance (orange trendline in Figure 3).
- Also, the index broke above its April high and the origin of the sharp decline in mid-March (yellow trendline – just above the 2,700 level).
- Major support levels:
- The two broken resistance levels are now expected to serve as support (i.e. yellow and orange trendlines).
- The ITS, currently at 2,622
- The 200 SMA (white line, currently at 2,620 – nearly identical as the ITS).
- Major resistance levels:
- The March 13 high at 2,800
- The January 26 high. The entire range from 2,850 to 2,873 is expected to serve as resistance.
Figure 3. S&P 500 Daily Chart
- The index is expected to retest at least 2,800 before the occurrence of any significant pullback.
- For the first time since the February correction ensued, there are enough bullish technical developments that point to a potential break of January’s high.
- Long positions in index-tracking ETFs and constituents recommended.
- A break of the ITS on a closing basis at any point should take precedence over any other technical developments (i.e. a break below the ITS will negate any bullish outlook).
- Short-term bullish as long as the index is trading above its ITS but below its March high.
- Bullish thesis will strengthen if the index breaks above its March high.
- Short- and long-term bearish if the index breaks below its ITS.
Featured image courtesy of Shutterstock.