Bulls fight back but bearish signals lingerRecent mixed price and momentum signals on the S&P 500 suggest traders should keep an open mind on whether to play the index from the long or short side in the near term.
For the bulls, the strong bounce from a zone comprising the 50-day moving average and May 23 uptrend over the past two sessions suggests the buy-the-dip trade remains alive despite Friday’s sharp pullback, pointing to the potential for an eventual retest of the record high at 6766.
However, bearish divergence with RSI (14) raises questions about the sustainability of the move, especially with MACD having already crossed the signal line from above before proceeding to trend lower. Bullish momentum is weakening, not building, likely keeping bears interested for the moment.
For those looking to play the index from the long side, there are few setups worth considering. If we were to see a break above 6700 resistance, longs could be established above the level with a stop below, targeting the record high of 6766 initially. Alternatively, another pullback and bounce from the 50DMA/May uptrend support zone would provide a decent entry level, allowing for longs to be set with a stop below for risk management purposes. Potential targets include Tuesday’s high, 6700 or 6766.
For the bears, a failure to clear 6700 resistance would create a short setup, allowing for trades to be established beneath the level with a stop above for protection. The 50DMA/May uptrend support zone screens as a logical initial target, with 6500 and 6360 other options after that.
Good luck!
DS
