The S&P 500 has reached the top of its uptrend channel, but has not yet signalled the beginning of a correction, according to Andy Dodd, Head of Technical Research at Louis Capital Markets.
Dodd says there is bound to be a pullback towards the longer-term uptrend at some stage but there are currently no overly bearish reversal signals on the chart to suggest the pullback is imminent (see Daily Chart for S&P 500 Future (ES1)). There is however a sign that the market is hesitating; a Spinning Top candlestick was formed yesterday (23 January) and Dodd will be monitoring for clearer signs of a move one way or the other.
One such sign would be a close below key short-term support at the 2819.75 level, derived from Monday’s (22 January) bullish Marabuzo candlestick, which Dodd says would leave a bearish three candle reversal pattern on the daily chart. If that happens, he would look to reverse short to take advantage of a move down towards the longer-term trendline. In the meantime, however, he remains long.