- S&P 500 forms higher lows above 5,550 as bulls eye the green gap near 5,650 amid fading volatility and short squeeze potential.
- IncomeSharks highlights contrarian rally risks as shorts remain trapped and price action presses upward toward key resistance levels.
- Mid-April’s sharp V-shaped recovery signals strong bullish intent while downside risks remain near 5,150 if momentum weakens.
The S&P 500 Index is on a recovery path, closing at 5,569.07 with a minor gain of 6.01 points. This move is part of a bigger bounce off mid-April lows, where the index dipped below 4,900. Successive higher lows have been appearing since then, which reflects a strengthening bullish structure. Besides, recent wicks on candles confirm buyer interest at lower levels. Consequently, traders are watching for a potential push toward the green gap near 5,650.
Bulls Target Green Zone as Shorts Get Squeezed
IncomeSharks, a popular market analyst, highlighted the “max pain” setup unfolding on the S&P 500 chart. Most traders remain short or in cash. Meanwhile, price action keeps pressing upward. Hence, this contrarian scenario could result in a rapid short squeeze if resistance zones break.
Source: IncomeSharks
Additionally, the chart displays two pink zones that previously acted as resistance. Price stalled at these areas before eventually breaking higher. This signals momentum strength when bulls gain control. A prominent green rectangular zone now sits overhead, acting as a target area. Moreover, the current price hovers near its bottom, suggesting potential continuation upward.
However, volatility has cooled recently. Current candles show smaller bodies with reduced volume compared to earlier sessions in April. Despite this, market structure remains bullish. Several consolidation zones emerged through April, allowing the index to build support for the ongoing uptrend.
Downside Risks Still in Play
While the bullish scenario looks promising, downside risks remain. A key arrow points toward 5,150. This indicates a potential reversal if momentum stalls or macroeconomic pressure returns. Besides, psychological levels like 5,500 could become battlegrounds for bulls and bears.
Mid-April’s V-shaped recovery marked the sharpest move of the period. A strong bounce followed the dip under 4,900. Since then, each pullback found higher support. This confirms growing confidence among buyers. Furthermore, blue trend lines highlight critical support and resistance levels. These provide context for potential breakout or rejection zones. Short-term traders may benefit from monitoring these lines closely.
