Kim Cramer Larsson
Technical Analyst, Saxo Bank
The benchmark S&P 500 equities index (US500.I) is forming what looks to be a Rising Wedge pattern testing the lower trendline yesterday.
Breakout from such a wedge usually occurs approximately two-thirds of the way to the apex (where the two lines meet), and we are almost there. Both the Relative Strength Index and and MACD are showing divergence, which indicates a bearish breakout.
A close outside of one of the trendlines is needed for confirmation. If the index indeed breaks out bearish around current levels, our minimum price target would be around 2,731, which is half the pattern height subtracted from the breakout price, as well as about the 0.764 retracement level of the wedge.
We see some support at 2,795. and 2,756.
Expect a pullback after the likely break out where buyers try to pull the market back above the lower trendline.
For the potential bear scenario to not play out, a close above 2,853 is needed (i.e. a close of the gap on the S&P 500 cash index). A close above that level could propel the market to new highs.