S&P 500: A current analysis of support and resistance

SP:SPX   S&P 500 Index
The recent strength of the S&P 500 has been undeniably formidable. After the recent breakdown and subsequent sharp sell-off, many traders (including myself) tried to reload their shorts at various places throughout the rally. Unsubstantial news about immediate trade deals fueled the rally last week and the rally refused to falter even when the news was rebuffed by White House officials. Many weak shorts were stopped out and I've seen many traders exclaim that 'buy the dip' is back on.

As I type this, I am watching the overnight futures make new lows down 17 handles suggesting all the more that tomorrow (if not overnight) we will test the very strong and unsustainable uptrend line that I have drawn on the chart. Upon a breakdown of that trendline I would not be surprised to see a test of support at 2597 and then potentially lower at 2520.

I believe the market is at an important juncture and likely has some proving to do. If we manage to find support and stay above it, the recent bull-run could have further legs. If not, a test of the December lows (or lower) would be in order. The market internals on the recent run-up were strong enough to make me second-guess any long-term bearish outlook I had. The advance-decline lines were strong, high-yield debt ( HYG ) recovered immensely after falling off a cliff and the price action in stocks like the financials was stellar . Yet, the real proof will be how well the bulls defend this rally in the face of a sell-off.

I have no trade recommendation other than to pay attention to the points on the above chart. Best of luck trading!
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