The market keeps on maintaining a positive mood as the recent economic data were interpreted as good news given the strength in labour market and the easing in price pressures.

Fed Chair Powell didn’t touch on monetary policy or recent set of data, removing a risk for the market and giving it more confidence to keep rallying.

We are at a crossroads.

On one hand, there’s the risk that the market is underestimating the Fed’s resolve and the impact that it will have on the economy.

On the other hand, the market is trading on the beliefs that the recession will be mild, and the Fed will achieve a soft landing.

Given the uncertainty, the technical here can be a guide.

S&P500 Technical Analysis

S&P500 daily
Daily chart of the S&P500

On the daily chart above, we can see that the price is now testing the major downward trendline that defined the 2022 bear market.

The price was stuck in a range during the Christmas holidays, but the NFP and ISM Services PMI gave the market the boost needed to break out of the range and rallying towards the trendline.

The bulls need a clear upside breakout to target the major resistances at 4175 and 4324.

Another fakeout and a fall below the 3900 level, will give the bears the confidence to target the October 2022 low at 3506.

S&P500 1hour
1-hour chart of the S&P500

Looking at the 1-hour chart, we can see the recent catalysts that pushed the market to the upside.

The beat in NFP and the miss in AHE and ISM Services PMI, ignited a strong move to the upside.

Once the market breached the resistance zone at 3920-3940, it pulled back waiting for Fed Chair Powell.

As that risk was removed, the market started rallying again targeting the blue trendline.

S&P 15 min chart
15-minutes chart of the S&P500

Zooming in to the 15 minutes chart, we can see the hard time that the bulls are having breaking to the upside.

The price may even consolidate here waiting for another catalyst.

The levels are defined though:

  • If the price stays above the 4022 level the bulls are in control.
  • If the price falls back into the range, it would be in no man’s land.
  • If the price falls below 3962 level, the bears will regain control.