S&P 500-Bounce is due as sentiment hits extremes

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by Kimble Charting

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This year the S&P 500 could be forming a bearish descending triangle. The declines over the past couple of weeks now have the broad market testing key support levels at (1) above. The Dow looks to be forming a similar descending triangle pattern, where a bounce is due as well says Joe Friday.

While the Dow and S&P are both testing support at the same time, the  CNN Fear/Greed indicator is now at short-term extremes (excess fear).

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The combo of the Dow and S&P testing support and sentiment at extremes suggests that a bounce is due!

Falling resistance for the S&P comes into play around the 2,700 level (around 4-5% above current prices).  Bulls want to see a bounce take place and this resistance line broken to the upside, so it can negate the bearish pattern.

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Bulls do not want to see the support line in the Dow and S&P taken out after short-term bounces, as that would suggest the short-term downtrend will continue. If support would happen to not hold, measured moves would suggest the Dow and S&P could fall at least another 5%.

 

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