Last week, the S&P 500 pulled back into key levels as the stronger than expected inflation data and the quick rise in Treasury yields weighed on the stock market. There’s been also some profit-taking as we approach the FOMC rate decision on Wednesday with the risk of a hawkish surprise. Overall, the market is likely to remain supported as long as the Fed does not restart to hike rates, or the economy does not falter.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 fell all the way back to the key trendline where we can also find the red 21 moving average for confluence. This is where we can expect the buyers to step in with a defined risk below the trendline to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 4946 level.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we can also find the 38.2% Fibonacci retracement level for extra confluence around the trendline. The price has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it led to pullbacks into the red 21 moving average where the dip-buyers kept on piling in to position for new highs. If the price were to break below the trendline though, a reversal would be confirmed, and we might see a bigger correction into the 4946 level.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the key support around the 5100 level highlighted by the green box. A break below this level is likely to trigger a big selloff into the 4946 level. If the price were to bounce from here and break above the recent swing high at 5137, then we can expect the buyers to increase the bullish bets into a new all-time high.
Upcoming Events
This week we have the FOMC rate decision on Wednesday where the Fed is expected to keep rates unchanged. The market will be on the lookout for hawkish surprises though following the stronger than expected inflation data. On Thursday, we conclude with the latest US PMIs and Jobless Claims figures.
