This article investigates a potential short setup on the S&P 500, emphasizing how the index's proximity to confluence resistance and the deteriorating market sentiment strengthen the bearish perspective.
If the bearish reversal scenario plays out and prices are rejected at the 5,165/5,185 resistance, a pullback towards April's swing low could be on the horizon. While a retest of this region might offer temporary support, a decisive breakdown would signal a potential extension toward 4,855. Further losses from this point onward would shift focus to the 200-day simple moving average near 4,725.
Despite a seemingly strong bearish thesis, traders should exercise caution and avoid fighting against prevailing price action. On that note, if the S&P 500 remains on a recovery path and pushes past the 5,165/5,185 ceiling convincingly on a daily closing basis, the short strategy would lose its validity. Such a breakout could reignite bullish sentiment, opening the path toward 5,260, with the possibility of revisiting the record high also in the cards.
To get an edge in your trading and understand how market positioning may affect the S&P 500’s path, download a copy of our sentiment guide!Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. Forex trading involves risk. Losses can exceed deposits.
We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Information presented by DailyFX Limited should be construed as market commentary, merely observing economical, political and market conditions. This information is made available for informational purposes only. It is not a solicitation or a recommendation to trade derivatives contracts or securities and should not be construed or interpreted as financial advice.
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