Who would have predicted last week that the S&P 500 futures would rise from the 2017 close at 2667.75 and push above the 2700 level for the first time, and then be challenging 2750 early this week? However, that is the current market that we trade; and that is why, more times than not, we present our bias as wanting to buy dips rather than sell the rallies.
This week, while the market seems overbought, we are not anxious to short and are instead looking for areas to be buyers on any pullback. We will give our technical view of the S&P 500 using the thirty-minute candlestick chart below, which covers last week’s open through today.
Price is currently doing business with the lower trend line in light blue, which marks last week’s series of higher lows. This trend line is very steep, and frankly unsustainable, and the price has now broken beneath it. While we are not bearish, we are looking for lower levels to buy in case this market trades them.
The first lower level for aggressive longs would be yesterday’s low at 2736.50, marked in yellow, which would be more than a ten-handle pullback. If that level fails, we would target at Friday’s low 2726.50 marked in orange, which would represent more than a twenty-handle pullback from this week’s high.
We have identified two additional lower targets, although we do not anticipate the market reaching them this week. We would be buyers at either of these levels. The first is last Thursday’s 2718.25 low, shown in red, and the second is the 50% retracement of last week’s range at 2709 in dark blue, which would be a couple ticks shy of a forty-handle pullback.
We should note that with each level, we would use a reasonable stop loss. Our view would be subject to change based on volume, momentum, and market news, the latter being the only thing we could see bringing this market down to these levels.
The big round 2750 would be our first target to the upside. The next higher level would be the 23.6% extension of last week’s range which is currently at 2759.25, and finally, the maximum target for the week would be the 38.2% extension at 2769.25, which we do not expect to see trade.
The economic calendar this week is relatively quiet with today (Tuesday) and tomorrow featuring three Fed speakers, eight lightweight economic reports, and three U.S. Treasury events.
Thursday’s PPI at 8:30 a.m. EST and Friday’s Consumer Price Index and Retail Sales at 8:30 are the highlights of this week, but are not expected to be major market movers. The last two days of this week offer seven economic reports, two Fed speakers, and seven U.S. Treasury events.