- Market Optimism: ES spiked 1.6% on Tuesday, suggesting a potential end to the equities pullback.
- Technical Signals: Bullish signs include an inverse head and shoulders pattern, an upward-angled 50-moving average, and a recovering RSI on the daily chart.
- Short-Term Opportunity: A 1-2-3 reversal pattern on the hourly chart with a target of $4,600, supported by price staying above $4,351.
Introduction
The pullback in equities might be coming to an end, as ES spiked 1.6% on Tuesday. The retracement seen on the daily chart was over 6% from the local top, and the recent bullish price action gives us confidence in being able to take long positions. Let’s re-look at the inverse head and shoulders pattern on ES and some other tools that could help us find good probabilities in the S&P 500.
Technical Analysis
We need to go back all the way to February, where we spotted the inverse head and shoulders. Take a quick look at the chart here before continuing. ES has surged out of that formation and doesn’t seem to be over yet. After yesterday’s (Wednesday, 29th) price action, it looks like the rally is not over yet. The next target is clearly the recent local top at the resistance zone $4,600, and then, if price is able to clear that with ease, bulls will be targeting all-time highs.
Some minor indicators we can note are the 50 moving average which is angled upward and the RSI which is recovering from a healthy pullback. All bullish signs.
The most bullish signal of them all on ES is the candlestick pattern from yesterday’s session which we can see clearly on shorter time frames.
Shorter time frame
There is a 1-2-3 reversal on the hourly chart as price broke above $4,485. The target is $4,600 and as long as price remains above $4,351, this setup is still valid. We may see price retrace back to $4,485 and re-test that level for support.
Bulls must see price remain above $4,351 for sentiment to remain bullish. Most signals as well as macroeconomic indicators, are pointing toward bullish market conditions.
