Critical Bounce on the S&P 500

Today, the S&P 500 presents a technical setup that demands attention. A large head and shoulders pattern, marked with an orange rectangle, has been forming on the chart since November. Yesterday, the right shoulder appeared to complete as the price approached the neckline, marked in yellow. However, instead of breaking below, the price bounced off the neckline in a sharp and decisive reversal, signaling strength among buyers.

This bounce is generally a positive development, as it suggests that sellers failed to capitalize on the opportunity to break the neckline and initiate a more substantial decline. If the price continues climbing higher from this point, it would serve as a strong signal to go long, with a clear defense line placed just below the yellow neckline for risk management.

On the other hand, if the price closes decisively below the yellow neckline, it would validate the head and shoulders pattern and act as a powerful long-term signal to sell. Such a breakdown would indicate that the bearish sentiment has taken hold, paving the way for further declines in the market.

For now, the S&P 500 remains at a critical juncture, and the next moves will provide clarity on whether bulls can sustain the bounce or if bears will regain control.

Source: https://www.axiory.com/analytics/technical-analysis/critical-bounce-on-the-s-p-500