S&P 500 Possible Ascending Wedge
The S&P 500 broke out above the 2130 area (previous resistance) to make new highs this past week but it also broke out of an ascending wedge (bearish) which means we could see some sort of pullback in the near-term. Here are two possible scenarios that could potentially play out.
Scenario one:
With the breakout to new highs, the upside momentum could limit any pullback to only a shallow retracement. Therefore, a retracement back to the breakout level in the 2130 area (yellow box) which also coincides with the 23.6 Fib level of the 7/14 high - 6/27 low (2174.3/1989.8), could find major support. If this support level holds, then we'll most likely see higher highs.
Scenario Two:
If the breakout from the ascending wedge plays out, the extension could target the 2060 area which is the 61.8 Fib level of the high/low mentioned above. Bear in mind (no pun intended), if the S&P 500 does retrace back below the 2030 area and is unable to find support near the 61.8 Fib level to bounce higher, a close below the 2130 area on a longer time frame (e.g. daily/weekly) could be the sign of a false breakout to the upside; and that a more meaningful pullback is in the works.
Bottom Line:
The 2130 area is the line in the sand for Bulls/Bears and we'll probably find out who the winners/losers are this coming week.
My analysis is for informational purposes only and should not be construed as advice to buy/sell any instrument. Always perform your own due-diligence and never enter into a trade based solely on someone else's opinion/analysis without doing your own.
Scenario one:
With the breakout to new highs, the upside momentum could limit any pullback to only a shallow retracement. Therefore, a retracement back to the breakout level in the 2130 area (yellow box) which also coincides with the 23.6 Fib level of the 7/14 high - 6/27 low (2174.3/1989.8), could find major support. If this support level holds, then we'll most likely see higher highs.
Scenario Two:
If the breakout from the ascending wedge plays out, the extension could target the 2060 area which is the 61.8 Fib level of the high/low mentioned above. Bear in mind (no pun intended), if the S&P 500 does retrace back below the 2030 area and is unable to find support near the 61.8 Fib level to bounce higher, a close below the 2130 area on a longer time frame (e.g. daily/weekly) could be the sign of a false breakout to the upside; and that a more meaningful pullback is in the works.
Bottom Line:
The 2130 area is the line in the sand for Bulls/Bears and we'll probably find out who the winners/losers are this coming week.
My analysis is for informational purposes only and should not be construed as advice to buy/sell any instrument. Always perform your own due-diligence and never enter into a trade based solely on someone else's opinion/analysis without doing your own.
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