For the last six weeks, the S&P 500 Index (SPX) has been stuck in a tight three-percent range. This has not been a normal tight range for this bull market, however—we’ve seen big spikes and drops over the last couple of months but with no resolution following these moves. All the dips have been bought, and all the bounces have preceded another geopolitical headline that then shakes things up again. So what will finally lead to a resolution and break this market out of its current range?
The next big event for stocks is going to be the debate over corporate tax reform. Part of the foundation of this year’s rally was the expectation that a Republican White House and Congress would pass tangible reform. But with an increasingly antagonistic relationship between the President and lawmakers, its future is looking shakier, and if tax reform goes the way of repealing Obamacare, an S&P 500 breakdown would be longer-lasting and could point to a more meaningful trend reversal.
On an even shorter-term technical basis, we are seeing an uptrend line support come in at 2450, from late August and resistance at 2480 from a downtrend line resistance from the middle of October. This is a symmetrical triangle pattern, which occurs when you see rising support and declining resistance. While it’s a sign that volatility has dropped, traders use this pattern to predict breakouts/breakdowns.
For the last six weeks, the S&P 500 has been stuck in a tight three-percent range. …read more
Read more here: What Will It Take to Un-Stick the S&P 500?