SPX Weekly – Neutral, close below 50 MA could see a drop to 2400

Since breaking out in November 2016 post US Election, we saw a huge rally, very smooth with mainly shallow pullbacks , no threat to the 20 MA and a nice and flat ATR curve.

Since hitting a peak in January 2018 at 2872, we have seen two deep retracements, each testing the bullish trendline drawn from the Jan 16 low at 1,810. The index is currently positioned bang on this trendline having tested but failed to breach the 50MA.

Notwithstanding the the political backdrop and noise surrounding international trade tariffs etc , we seem to be in a technically vulnerable position. The lower subchart highlights the spike in ATR, with the higher vol reflecting market participant's uncertainty. We also have a bear flag in play which targets a move to 2400 which is also a resistance turned support level from Feb 2017 high. If we see price fall through the sloping bullish trendline (2603) and the 50MA (2567) then this would add conviction to the flag target.

Below 2400 we have further horizontal support at 2319 and then the 200MA around 2200. I would need to see all these levels cleared to turn fully bearish.

For now, I am interested in how price performs around the key levels

Happy Trading