Article / 25 June 2013 at 10:17 GMT

S&P 500 bounces from support - outlook remains bearish

Technical Analyst / Saxo Bank

After the past couple of day's sell-offs, yesterday the S&P 500 bounced off its 38.2 percent retracement level. Now we could see a few days of further rebounds but there are signals of bearish momentum and we will most likely not see indications of a bullish market as long as the S&P 500 is trading below 1650.

The relative strength index (RSI) is below the 40 threshold with no divergence. The moving average convergence/divergence indicator (MACD) also points lower. Bollinger bands are expanding i.e. in the developing stage and thus also indicate the bearish move is likely to continue.  

S&P 500 daily

Watch out for a potential death cross between the 21 and 55 daily moving average. That situation has occurred three times since 2009 leading to between a 6 and 14  percent drop in the Index. 

As I mentioned yesterday on SaxoTV in Charts: Why I'm Still Bullish On the S+P I expect the Index to drop further and a test of 1500 and the 200-day moving average is likely. 

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