Day trade
Trade view / 22 June 2016 at 5:01 GMT

Corrective bounce a sign of weakness for S&P500


The S&P500 (US500.I) put in a high on June 8 and a decline followed that. And the move lower into the final price low on June 16 has been followed by a three-wave bounce. As at least the short to medium term trend appears to have changed, and with the June 8 peak we could expect more downside in the short term.

US markets have been awfully stubborn and strong compared to their European peers. But even if we are now seeing a pronounced trend higher, we should still experience a retest of the June 16 lows at around the 2,050 level before the tape possibly turns bullish again in an Elliott 5-3-5 move.

Monday price failed to establish itself above the 2 094 Gann pivot and yesterday we experienced two touches and failures to get back above. It appears as though this level is quite important and as long we can stay below this market has a shot at moving lower into the 2 071 and 2 050 pivots. 

Support is found at 2,071, 2,050, 2 047 and 2,026. The support area around 2,050 could be fairly strong.

Resistance is located at 2,094 and if price can establish itself above this level 2,117, which is the next key level to the upside.

Management and risk description

It appears that this market is likely to move lower in the short term, which explains the plan to short at market but below 2,094 for a move into support at 2,071 and 2,050. The stop could be placed upon established price action above 2,094 or if one prefer a hard stop 2,105.

The risk to this setup is a break above 2,094, or that the trade fails to reach the outlined target levels before reversing higher. Jitters surrounding the Brexit vote pose a risk as well.

Once the first target has been reached, consider taking partial profits and move the stop to 2,094.


Entry: Sell below 2,094.

Stop: Established price action above 2,094 or hard stop at 2,105.

Target: 2,071 and 2,050.

Time horizon: One to two days.

S&P500 daily chart
US500.I daily chart
S&P500 hourly chart
US500.I hourly chart

S&P500 daily development chart
US500.I daily development chart
Source: SaxoTrader. Create your own charts with SaxoTrader; click here to learn more. 

— Edited by Robert Ryan

Non-independent investment research disclaimer applies. Read more
22 June
Johan Berntorp Johan Berntorp
The situation looked dire for a while but the market came back down. The current structure, hourly chart, is telling us this market are in a new larger cycle higher heading for 2 117 if above 2 100, but below low of today it would be a surprise not to see 2 071 at least. So we are basically back from where we started out...
22 June
Johan Berntorp Johan Berntorp
To clarify, bearish bias below 2 094 due to failure by the bulls to stay above. Below low of today further signals of weakness.
22 June
leo_100 leo_100
is it late to get into the trade now?
23 June
Johan Berntorp Johan Berntorp
Sorry, didn't see your question until now. We want it below 2 094 to enter, currently we are above again.


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