S&P 500 Technical Highlights:
- S&P 500 closed last week at big support
- Bounce near-term set up to fail, big swoosh lower to follow
- Levels and lines on the chart to watch
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The last time we delved into the technical outlook for the S&P 500, we were taking note of the Dow Jones Industrial Average and the symmetrical triangle it was on the verge of breaking free from. The breakdown last week put shorts out in front, with big support in the S&P 500 coming under test by the close on Friday.
The 200-day MA and trend-line from the February 2016 low (end of the last market correction) are in confluence, making the test extremely important. At the time of this writing, pre-market futures are trading strongly higher by about 35 handles, setting the market up to at least open the week on a positive note.
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S&P 500 Daily Chart (Big support test)
Should today’s gap hold and we see short-term relief, the market will live to fight another day. The first level of resistance is at 2647. However, given the recent velocity of the sell-off following a lower-high a couple of weeks back, any rally we see in the near-term looks likely to only be a recovery bounce before breaking support.
We’ll respect support, though, for as long as it lasts. But should it break, the Feb spike-low will quickly come into play at 2532, then beneath there we have to look to the lower parallel tied to the trend-line connecting the record highs with the monthly high. The lower parallel arrives in the vicinity of the mid-2400s.
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—Written by Paul Robinson, Market Analyst
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