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S&P 500 price analysis: a retest of the wedge breakout

S&P 500 price analysis: We have seen a mild recovery from the wedge breakout. Selling into rallies offers a favourable reward and risk setup.

Market highlights from the past week

Friday, May 1: Major eurozone bourses were closed for holidays on Friday. US equities lost ground with a more sober tone following April’s strongest monthly gain for more than30 years.

Monday, May 4: Risk appetite remained fragile on Monday, but US equities moved higher in late trading to post net gains with bullish sentiment making net gains in Asia on Tuesday.

Tuesday, May 5: Risk appetite held firm with equities in positive territory, although gains were limited amid unease that global recovery would be slow.

Wednesday, May 6: Overall risk conditions were slightly more cautious, especially with underlying US-China tensions. and equities overall were slightly lower.

S&P 500 price analysis

Let us have a look at the technical viewpoint.

Monthly: Strong selling pressure from the 3398, multiyear high. This resulted in losses of more than 35 per cent to the 2180 low. April posted net gains, but all trading was inside the March range, an indecisive inside month.

Weekly: Levels close to the 62 per cent pullback level of 2936 found sellers (from 3398-2180).

Daily: Broken out of the ending wedge formation to the downside. This formation has a target level of 2430. The reverse trend line resistance is seen at 2973. Previous swing high is seen at 2972. Support is located at 2845.

Outlook: We have seen a mild recovery from the wedge breakout. A retest of the breakout trend line is common. We have US non-farm payroll this afternoon, which is likely to be market moving. A break of support at 2845 and the move lower is assessed as underway. Selling into rallies offers a favourable reward and risk setup, looking at a short-term outlook for a long-term target.

Possible trade setup

Action: Selling at 2972

Stop: 3005

Targets: 2430

Potential return on risk to first target: R16.4 (reward 542 / risk 33)

USA 500
Daily change
2948.2
Low: 2914.7
High: 2953.9

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