The recent gains in the S&P may not be sustainable in the medium-term, according to Andy Dodd, Head of Technical Research at Louis Capital Markets.
Dodd sees some worrying signs such as the appearance of three gaps (breakway, continuation and exhaustion) and an imperfect inverted hammer candlestick on the daily chart. The market is also trading above its upper Bollinger Band on the weekly chart, which “has historically proved a good signal that a rally is becoming over-stretched.”
However, Dodd notes that no real reversal sign has appeared as yet and he would suggest waiting for such a signal before trying to call the top of the rally.
Read Louis Capital’s Weekly Technical Overview, including an analysis of the major equity, FX and commodity markets.