S&P 500 TECHNICAL OUTLOOK: BEARISH
- S&P 500 breaks trend line support, warns selloff is resuming
- Foothold above 3027.75 needed to neutralize selling pressure
- Trader sentiment studies warn bearish pivot may be brewing
The S&P 500 is attempting to re-engage the downtrend started in late February courtesy of the Covid-19 coronavirus outbreak. A false start a week agoended fruitlessly but sellers are trying to retake momentum once again with a break of trend line support guiding the bellwether stock index’s recovery from late-February lows, where it found a bottom as the Fed leaned in against a would-be credit crisis.
From here, breaking below initial support at 2726.50 on a daily closing basis looks likely to expose the 2603-26 price inflection zone next. Beyond that, the spotlight turns to the December 2018 low at 2316.37, followed by the 2020 bottom at 2174. Neutralizing the near-term bearish bias seems to require prices to reclaim a foothold above resistance in the 3023.50-27.75 area.
Daily S&P 500 chart created with TradingView
S&P 500 TRADER SENTIMENT
Retail sentiment data shows 72.67% of traders are net-short, with the short-to-long ratio at 2.66 to 1. IG Client Sentiment (IGCS) is typically used as a contrarian indicator, so the skew in current positioning suggests that the S&P 500 is biased upward. However, the tilt in sellers’ favor has narrowed compared with yesterday and a week ago, hinting that a reversal in the opposite direction may be in the works.
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— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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