Hot Features
Premium
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
After 3-months of coiling the S&P500 has regained its focus on the all-time highs following the return of bullish momentum.
Near the end of April, we highlighted the importance of a large coiling pattern on the S&P500 and the impact a breakout could have on global sentiment. The logic was simple; a notable breakout in either direction would likely be part of, or the reason for broader risk-on or risk-off sentiment for global markets. Whilst perma-bears were likely chanting the end is surely nigh throughout the coiling pattern, they’ll be sorely disappointed to see it has indeed broken higher. But for those who like to trade with momentum, patience has sided with the bull camp.
The daily timeframe shows that two bullish hammers closed above the 200-day average before breaking a retracement line from the all-time highs. At the time price action was messy, so we admit it may have proved tricky to confidently call a low around that time. Yet as the breakout is accelerating away from the 200-day average the prominent swing low at 2594.62 could prove to be the first of many.
In our previous analysis we refrained from drawing a symmetrical triangle as coiling patterns can provide false breaks and make a mockery of nicely drawn trendlines. But price action has since evolved and its reassuring to see that a bull flag retracement perfectly respected the retracement line which then acted as a springboard for its current leg higher. Interestingly, the bull flag projects an initial target just beneath the all-time highs, although 2801.90 may provide interim resistance.
With risk sentiment moving in line with the S&P’s breakout a retest (and dare we say break of) the highs seem achievable. But let’s not lose sight of the risks ahead as complacency is the devil. G7 talks kick-off shortly where US ‘allies’ are fuming over Trump’s latest set of tariffs. And whilst the Trump-Kim summit is seen as a positive for markets, they have cancelled it before and can cancel it again to dampen sprits. Add into the mix next week’s Fed meeting, nothing is in the bag yet.
Faraday Research offers real time FX and Equity trade signals from qualified analysts. Click here to try us free.
