Dow Jones and S&P 500 Potentially Carving Out Tops


Dow Jones/S&P 500 Outlook:

See how the quarterly forecast has played out so far and what it could mean to end June in the Q2 Equity Markets Forecast.

Dow Jones has head-and-shoulders potential

The Dow Jones has seen some nice lift these past few sessions, bolstering it back above the 200-day MA. In the process of rallying it could be carving out the right shoulder of a head-and-shoulders (H&S) pattern. This is only a scenario at this time as the right should still needs to form and then a break of the neckline needs to develop for the scenario to be validated.

It’s a scenario worth monitoring closely at this juncture with only a limited amount of time needed before a trigger-event could happen. A spot to watch for as resistance near-term is the high of the last minor bounce in the 25880/957-area. A turn down from around there would make for a fairly symmetrical-looking pattern.

Again, the neckline needs to be broken so there is work yet to be done. If the market continues to work its way higher without a meaningful turn down, then continuing to run with a bullish bias may be the most suitable approach. A failure to turn down from the aforementioned resistance zone, or only a shallow pullback may indeed offer a long set-up.

At this time given where we are in the bounce off the lows, risk/reward from either side doesn’t hold much appeal at the moment.

Check out the IG Client Sentiment page to see how retail traders are positioned and what it could potentially mean for various currencies and markets moving forward.

Dow Jones Daily Chart (H&S potential)

Dow Jones and S&P 500 Potentially Carving Out Tops

S&P 500 rallying but may soon fail

The S&P 500 doesn’t hold much clarity at this juncture, it’s not sporting a look that gives either side the edge at the moment. If the Dow has the clearer pattern and indeed does come to fully develop the H&S pattern, then the S&P is headed for a lower-high of significance. If not, then a consolidation pattern in the near-term may at some point offer a set-up for a long trade to the top-side. Watch how price reacts should it reach up to the 2876/92 zone.

S&P 500 Daily Chart (Lower-high to develop?)

Dow Jones and S&P 500 Potentially Carving Out Tops

To learn more about U.S. indices, check out “The Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities.” You can join me every Wednesday at 10 GMT for live analysis on equity indices and commodities, and for the remaining roster of live events, check out the webinar calendar.

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—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX



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