Friday's Market Minute: Are Equity Indices Topping Out?

Yesterday’s -0.4% fall in the S&P 500 futures contract may have stung bulls a bit, but some giveback shouldn’t be a surprise at this point. /ES hasn’t closed more than 1% lower since June 18th, which was the start of a nearly 5% run-up in which only five trading days of the past 18 were red. Even though the price may feel somewhat precarious at all-time highs, it’s actually on the familiar technical ground near the yearly Linear Regression Line, currently around 4344.

The index spent a great deal of time near this indicator in recent months, so a significant break below this level could provide clues that the uptrend is failing. There are some other signs on the horizon worth watching, such as the RSI showing bearish divergence during Monday’s new all-time high closing price, suggesting weaker momentum as the price rises. Another thing to consider is how relatively light trading has been during much of this move upward, with the spikes happening on down days such as July 8th and yesterday – so be aware and be ready to make quick moves if the situation worsens. Keep an eye on the Parabolic SAR near 4332 and the 21-day Exponential Moving Average near 4305 as other key points of support.

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