The broader direction for US indices remains upward for now. Yet after weeks of near one-way gains, the S&P 500 Index (^SPX) chart is beginning to show signs of fatigue. Combined with a lack of any breakthrough in the Middle East situation, that does raise the risks of a correction, observes Fawad Razaqzada, technical analyst at TradingCandles.
To some extent, that process may already be underway. S&P 500 futures have spent much of the past couple of weeks trading broadly around similar levels before edging to a new all-time high this week. We did see a pause around the 7,500 level as I had anticipated, before the upward trend resumed.
The next question is whether this latest move higher develops into a more sustained rally, or whether it quickly fades into to a cooling-off period. Technically, the rally that begun at the end of March has now extended well into territories where profit-taking becomes increasingly understandable.
The futures contract has moved above the 161.8% Fibonacci extension of the sell-off that began in late January and bottomed toward the end of March. That projection lies near the 7,470 area and we have already seen some profit-taking around there in the last couple of weeks.
While the index is now above it, and moving past the 7,500 level, there is not much in the way of fresh stimulus measures to keep the market moving higher. So, I would expect some choppy price action, especially around this time of the year.
