The S&P 500 selloff has been remarkable with key levels being breached with no hesitation as the sentiment turned negative. The reason for the selloff is unclear as the US data has been supporting the soft-landing narrative but the sharp slowdown in the Chinese economy is expected to infect the other advanced economies and drag the global economy down. Moreover, the quick rise in long term Treasury yields is also tightening financial conditions with real yields approaching the levels last seen during the Global Financial Crisis of 2008. It’s a tough environment for sure, so the technicals will be very helpful in managing the risk.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 extended the fall beyond the trendline and it’s now eyeing the key support at 4324. That’s where we can expect the buyers to step in more strongly with a defined risk below the level and target again the high. The bias for now remains bearish though as the market keeps printing lower lows and lower highs and the moving averages are crossed to the downside.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that if we get a bigger pullback, we will have a strong resistance around the 50% Fibonacci retracement level where we have the confluence of the broken trendline that may act as resistance on a retest and the downward trendline. That’s where we can expect the sellers coming in more aggressively to extend the selloff beyond the 4324 support.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that minor downward trendline has recently been breached but the price couldn’t rally past the previous swing high level. If the price falls below the trendline again, we can expect more sellers piling in to extend the fall into the 4324 support. On the other hand, if the price bounces and breaks above the swing high resistance, we can expect the buyers jumping onboard and take the price into the 50% Fibonacci retracement level.
Upcoming Events
This week is pretty empty on the data front with just the US PMIs scheduled for Wednesday and the US Jobless Claims for Thursday. We seem to be at a point where good news is bad news because of the Fed’s stance and bad news is bad news because the slowdown in global growth will lead to a recession in many countries included the US. Remember also that it’s the Jackson Hole Symposium week, so we will get comments from Fed officials again and especially Fed Chair Powell who is scheduled to speak on Friday.
