Can the S&P 500 March Towards A New Record Before the Week Runs Out?

Summary:

Can the S&P 500 march towards new highs before the week runs out? The pointers indicate it can, even as there are several headwinds along the way.

The S&P 500 index is trading higher on the day as a slew of positive news has buoyed markets. The S&P 500 follows other US markets higher, as the exchanges welcome the possibility of a capital gains tax cut by US President Donald Trump, as muted by US Treasury Secretary Mnuchin.

According to the Treasury Secretary in a Fox Business interview, US President Donald Trump wants cuts for taxes paid on capital gains. Furthermore, the surge in US Treasury bills yields set up the financial stocks for a strong showing, boosting the S&P 500 by 1.26% on the day at 3,375.5.

However, the lack of progress in any negotiations between Democrats and Republicans to approve a comprehensive stimulus package that goes beyond the package signed by US President Trump under emergency clauses continues to put a lid on further progress in market activity on the S&P 500 index.

Technical Outlook for S&P 500

I love what is happening on the S&P 500 daily chart. The price action is displaying the typical price action expected in a chart pattern, where the borders of the pattern clearly define the price moves. I traced the pattern on this chart a while ago, and since then, the price has continued to bounce around the pattern’s edges. Yesterday’s rejection at the upper border of the wedge and subsequent support bounce on the lower limit of the channel, at the point of intersection with the support at 3335.5, follows this trail.

Today’s bullish candle has met resistance at the wedge’s upper border, with the support at 3393.5 hanging just overhead. This price is also the R1 resistance pivot. This is the level that bulls need to beat to establish a new record high on the index, which would also invalidate the pattern.

On the flip side, a rejection at the current resistance could allow for another move to the south, which could then challenge the 3335.5 support once more. If price bounces off this support, look for another possible leg up as price keeps trading within the channel’s borders. Otherwise, a breakdown of 3335.5 allows for a move to 3228.4, wíth further support seen at 3137.0 and 3070.8.