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 chartS&P500 hourly chart
S&P500 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