S&P 500 Stock Index ends Months of Uncertainty

Points to consider with the S&P 500 stock index:

• The S&P goes from a yearly high to a fresh three month low.
• This price action has broader implications and is damaging.
• Short-term charts are a mess. Expect a period of consolidation to start now.

After the Brexit vote on Friday, the S&P 500 stock index fell from a yearly high, which was also almost a new record, to a better than three month low. The period of choppy price action we had seen over the last several months in this stock index was wiped out in one day. All of the short-term daily charts are a mess. From a risk to reward perspective, trading beyond short term intraday moves is very difficult at this time as there is no clear directional cues. Please refer to the below daily MT 4 chart.

No Clarity with the S&P Stock Index

Time is needed to find clarity and quite frankly, a period of consolidation, will do us all some good. Whichever retracement emerges will help us to understand which levels to focus on. There will be a move, eventually, but will it be to garner confidence or act like an oversold bounce leading to more weakness. Only time will tell and, as mentioned above, the short-term charts have been decimated.

Traders should lean towards the latter as there will be broader weakness thanks to the Brexit vote. However, it is still not certain whether to look out over one or even three weeks or longer. In the longer-term US markets still appear to have a broad based weakness. This is in line with the global stock weakness we are seeing in other markets. It looks like, for now, we could be heading into a rather sizeable loss into the last half of 2016.