24 May 2021, 10:04
We have come to the last week of May and it had not been as bearish as we had feared. Now, are we going to see more downside since May wasn’t extremely bearish or could this indicate good tidings for the stock market in the near future?
Looking at the S&P 500 chart, we see a pretty strange pattern occurring. In April, the index was consolidating within a tight range. This is denoted by the 2 black lines in the picture. The index tried to break above the upper resistance line but it failed. A failed breakout was then followed by some downside. It broke below the lower support line and most investors were expecting more downside after that. However, surprisingly, there was another failed breakout, this time towards the downside. The index sprang back up into the black lines range again. So, where can the market go from here.
It is difficult to nail down which is the most probable direction the markets could take next week, now that the index has gone back inside that range. I would say the market is confused right now so it would be more prudent to observe for next week.
When the market is confused, it is always better to stay sidelines for awhile. You do not need to trade all the time.