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S&P 500 weekly technical analysis outlook 18th May 2024

Last week we felt that the index could attempt a move back up to fresh all time highs, so the continued strength in recent days has been as expected.

Recent consumer sentiment on the US stock market is at multi year highs and the VIX is at multi year lows, so this must mean everything is looking hunky-dory, right?

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Well, unfortunately when these indicators are at “positive” extremes like this they are often useful contrarian indicators. Essentially if all is so good, who is left to buy. This does leave the index as looking vulnerable to some minor weakness in the days ahead.

It is important to state that this “weakness” is relative and is only a weakness when compared to the strong gains posted in the past 6 months. But a move back towards the internal support line, black line on chart, currently around 5100 would seem probable as needed to keep the buyers interested going forward.

This is not an opportunity to open shorts on the index in our opinion, as the trend is so bullish, but it could be an opportunity to take profits and lighten up on certain risk-on segments, as the index does look vulnerable to a minor pullback next week.

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