S&P 500 Short-term Technical Outlook: SPX500 Recovery Levels

S&P 500 Technical Price Outlook: Short-term Trade Levels

• S&P 500 technical trade level update – Daily & Intraday Charts
• SPX500 marks outside-day reversal off key support zone– risk for bear market recovery
• SPX Resistance 3734, 3810, 3906/08 (critical) – Support 3590, 3482-3506 (key), 3397

The S&P 500 snapped a six-day losing streak with the fifth largest daily reversal on record yesterday and the rebound off confluent support threatens a larger recovery within the confines of the broader downtrend. These are the targets and invalidation levels that matter on the SPX500 technical price charts into the close of the week. Review my latest Strategy Webinar for an in-depth breakdown of this SPX500 setup and more.

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S&P 500 Price Chart – SPX500 Daily

Chart Prepared by Michael Boutros, Technical Strategist; SPX500 on Tradingview

Technical Outlook: Yesterday, the S&P 500 posted an outside-day reversal off a key support zone we’ve been tracking for months now at 3482-3501– a region defined by the 50% retracement of the 2020 advance and the 1.618% Fibonacci extension (low registered at 3491!). Note basic channel support also converges on this zone and highlights the threat for a larger recovery off the lower bounds of the broader downtrend.

S&P 500 Price Chart – SPX500 240min

Chart Prepared by Michael Boutros, Technical Strategist; SPX500 on Tradingview

Notes: A closer look at SPX500 price action shows the index trading within the confines of a newly identified ascending pitchfork formation extending off the October lows- its too early to rely on this slope but for now, the focus remains weighted to the topside while above the objective monthly open at 3590. Initial resistance eyed at the 2021 yearly open at 3734 backed by the 38.2% retracement of the August decline at 3810. Broader bearish invalidation now lowered to the highlighted confluence zone around 3906/08 where the May low-day close and the 50% retracement converge on both long & short-term slope resistance- look for a larger reaction in price there IF reached.

Ultimately a break / daily close below key support at 3482-3506 would be needed to mark resumption of the yearly downtrend with such a scenario likely to fuel another accelerated decline towards the February & January 2020 highs at 3397 and 3337 respectively.

Bottom line: The S&P 500 has rebounded off confluent downtrend support – risk for further recovery in the days ahead while above the October open. From at trading standpoint, pullbacks should be limited to 3590s IF the index is heading higher on this stretch. Note that the October opening-range remains intact – respect a break in the days ahead. Ultimately a larger rebound here may offer more favorable opportunities closer to downtrend resistance. Review my last S&P 500 Weekly Technical Forecast for a closer look at the longer-term SPX 500 technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

S&P 500 Trader Sentiment – US500 Price Chart

• A summary of IG Client Sentiment shows traders are net-long the S&P 500- the ratio stands at +1.59 (61.33% of traders are long) – typically a bearish reading
• Long positions are 10.90% lower than yesterday and 2.22% lower from last week
• Short positions are 7.60% higher than yesterday and 6.34% lower from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests S&P 500 prices may continue to fall. Traders are less net-long than yesterday but more net-long from last week. The combination of current positioning and recent changes gives us a further mixed S&P 500 trading bias from a sentiment standpoint.

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-Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex