Stocks pop, but S&P 500 and Dow remain carving out
Clean daily close below SPX 2035 required for H&S to
Trading between the lines until confirmation
Yesterday, the market experienced a sizable pop, pushing the
major indices up by about 1% or greater for the day. The S&P
500 and Dow both bounced from near what we have been viewing as
neck-line support of head-and-shoulder topping formations. The
Dow actually bounced from just beneath it, which is one of the
reasons we said yesterday we
want to see the broader S&P confirm the
before getting too excited.
The bounce in the SPX is taking it back near the top-side
trend-line off the April 20 peak. This will act as resistance and
a move above should carry no further than the May 10 high at 2085
if the identified topping formation is to maintain its integrity.
Support on a down-move comes in around 2035/39. A clean daily
close below 2035 puts us in ‘full-on bear’ mode. Until then, we
will continue to play between the lines.
If the market continues to move sideways, then the alternate
descending wedge scenario will come into focus. The series of
lower highs with a relatively flat bottom of which a descending
triangle consists of, is bearish in nature and will likely lead
to the same outcome as the H&S.
Keep in mind, seasonality is not on the market’s side, and
neither is stiff resistance just above between 2083 and 2116. The
Nasdaq lagging behind is also not a sign of good market
The Nasdaq 100 is attempting to carry above a developing
top-side slope line at this time, but as long as it is unable to
close above sloping resistance or the May 11 peak at 4408, then
the near-term chart remains postured lower. A break below 4308 is
likely to usher in a move towards, and likely below, the May 6
low at 4277.
For now, trading between the lines with short-term holds in
mind is the game-plan on this end, but should we see one of the
two before mentioned developments confirm itself, we will be
ready for a broad market move.
—Written by Paul Robinson, Market Analyst
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