On the daily chart below, we can see that the breakout of the key 4175 resistance has failed again as the S&P 500 got smacked back down soon after a probe above the 4200 high.
This selloff comes amid some negative headlines on the debt ceiling front and another strong US economic report in the form of Services PMI, which may force the Fed to do more as core inflation might remain sticky above the 4% level. Now we are back within the range between the 4061 support and 4175 resistance. This is some real chop indeed.
S&P 500 Technical Analysis
In the 4 hour chart below, we can see that the selloff from the 4200 high stalled right at the previous minor support at 4120. This is the level that the sellers couldn’t break last week and that led to a big rally once we got positive news on the debt ceiling negotiations. The fundamentals are starting to get more and more bearish as strong economic data should keep inflation higher for longer and the Fed should be forced to keep hiking. If we throw there also a risk of a US default, even if really low, the buyers should have a hard time limiting the downside.
In the 1 hour chart below, we can see that the S&P 500 bounced from the 4120 support and the moving averages have crossed to the upside. We may now see a little pullback into the red long period moving average and a continuation to the upside. If the price pulls back all the way back down to the 4120 support, the buyers will have an even better risk to reward setup with a defined risk just below that level.
The target should be the 4175 resistance, but ultimately they will want to target a breakout. The sellers, on the other hand, should wait for the price to break below the 4120 support to get the conviction to pile in and target the 4061 support.