U.S. equity markets seem to be off to a cautious start so far this year, leading the S&P 500 index to consolidate inside a triangle pattern.
Which way can it break out?
Take a look at these potential support and resistance zones on the 4-hour chart:
S&P 500 Index (SP500) 4-hour Forex Chart by TradingView
Sentiment has been shifting on a dime over the past few weeks, as traders continue to weigh the implications of the incoming Trump administration and a potentially less dovish Fed on the financial markets.
The S&P 500 index has formed higher lows and lower highs since mid-December, creating a symmetrical triangle visible on its 4-hour time frame.
The index is hovering above the triangle bottom, still deciding whether to bounce or to break. Are buyers about to defend this support area?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the U.S. stock market, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
Reversal candlesticks appear to be forming at the triangle support, suggesting that a move back up to the top near the $6,000 mark could follow. Sustained bullish momentum past the top of the triangle could even lift the equity index to the next upside target at R2 ($6,079.52).
However, the 100 SMA just crossed below the 200 SMA to suggest that the path of least resistance is to the downside.
Look out for long red candles hinting that bears are taking the upper hand, as this could be followed by a drop to the next support zones at S1 ($5,851.86) then S2 ($5,762.36).
Whichever bias you end up trading, don’t forget to practice proper risk management and stay aware of top-tier catalysts that could influence overall market sentiment!
