While the enquiry of lines drawn on a chart is hardly an exact science, investors time after time pay close attention when major trendlines are on the verge of being breached. The long-term weekly chart of the S&P 500 is currently escort just one of those instances, as the index has just declined to a rising trendline that supplements back to the low of February 2016. That low connects with a low in October 2016 to hold out right up to the current price.
What It May Mean
Market technicians explain this in a couple of different ways. For one, this trendline may be acting as “fund,” which could help prevent further declines in the price of the mark. Aiding this interpretation are other indicators – like the relative reliability index (RSI), moving average convergence divergence (MACD) or the stochastics screened on the chart below – which are showing that the S&P 500 is at or near “oversold” equals and could soon be due for a rebound. A much less optimistic interpretation of what’s currently episode with the trendline warns of potential catastrophe if the line is fully breached to the downside. Such a decomposition could indicate a much bigger potential sell-off going aid, according to some technical analysts.
Why It Matters
Monday’s very shilly-shallying price action has been the rule of late, and it’s the type of market relocation that frustrates analysts (and investors) to no end. When price was up sharply in the morning, it seemed that a trendline animation would be a foregone conclusion. As markets sank in the afternoon, though, it now arises that a trendline breakdown may be a more probable scenario. In either issue, it will likely take at least a few more weeks of price clash to determine with more confidence whether the S&P 500 uptrend prolongs or if a further breakdown turns into an extended market slide.
Rise: TradingView