- The S&P 500 propelled higher following test of inverse H&S neckline
- 2078/83 came under assault, trend-line joins resistance
- Current short-term trend is higher, key support/resistance zones in focus for further guidance
Yesterday, we saw a nice swing higher in the market following a neckline retest of the inverse head-and-shoulders pattern in the S&P 500 (FXCM: SPX500) we are using as our short-term guide. The pre-cash session pullback took the market down into support below 2066, further etching that area out as a key spot in the near-term.
The day's strength saw the 2078/83 resistance zone pressed during late-day trading. There is a trend-line off the April 20 peak in the vicinity of horizontal resistance, which the market must now also contend with before moving to higher ground. This morning futures are weakening a bit from resistance, increasing the likelihood the trend-line (bottom of rising channel) off the May 6 low will come into play as support. As long as it holds, then the short-term trend remains intact along with the inverse H&S.
Strength back into the 2078/83 area will be watched closely, as a break above opens the door up for a move towards 2095/100, which is roughly where the measured move target of the H&S pattern lies along withactual price resistance.
However, if buyers can't chomp through resistance and a rejection results in a drop below support, then the inverse H&S formation will come under fire and alternative paths will need to be considered.
It's a little pre-mature to discuss, but a traditional 'head-and-shoulders' pattern could be forming if we see the daily chart soon rollover. We will delve into that further should it become relevant,as these price patterns aren't until they are.
Different day, same approach - Quick 1 to 3-day hitters preferred until clarity on the bigger picture presents itself. At this time, until the market proves the current upswing 'incorrect' we will lean on support and trend structure remaining positive in the short-term with prospects of pushing back further into the broader daily resistance zone between 2083/116 . But, we will be quick to 'turn-and-burn' on that stance should resistance prove to be formidable and support levels give way.
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---Written by Paul Robinson, Market Analyst
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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