The price pattern for June S&P on the daily chart could easily be seen as a bear-flag pattern that implies lower prices are on the horizon. For now, however, leaning towards the double bottom developing is a possibility. The driving force behind that bias is the fact that last week's bounce started from the 38% retracement support of the entire rally from the June lows.
That implies that the larger bullish trend is still the dominant pattern for the market. The danger is that the contract closes a session or two below that support level, which sits at 1371 on the cash index.
Given that the seasonals are still bullish and sentiment, in terms of the 20-day equity put/call ratio, never became overly optimistic the bigger picture still has a chance to recover nicely into the May time frame. From a much shorter time frame, if the June contract can close above the hourly swing point (1395) this morning it will start to put the building blocks in place for a better recovery.
Failure to close above there, however, almost guarantees a test of the prior low for the contract at 1384. From a risk reward perspective that would likely be a good place to try a small long as a break below would be a quick signal that the decline is more significant.
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