SPX reach a strong resistance zone. What’s next?
The last week was incredible for the 
SPX with the index rallying for five consecutive trading days. The bulk of the rally came after the FOMC rate decision where the Fed left interest rates unchanged and Fed Chair Powell delivered less hawkish than expected remarks. The S&P 500 then extended the gains into the weekend after the NFP report missed forecasts and the ISM Services PMI came lower than expected.
One may think that the stock market sees a soft landing and the fall in Treasury yields is a good thing. Unfortunately, Treasury yields fell likely because the bond market sees more weakness to come in the next few months given the softening in the labour market. So, the rally we’ve seen out of the disappointing data is likely to be misplaced and the market might correct that soon.
On the daily chart, we can see that the S&P 500 reversed two weeks of losses in just a week, but the rally is now very overstretched as depicted by the price distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
We can also see that the price has come into a strong resistance zone where we can find the previous swing high and the 61.8% Fibonacci retracement level. This is where the sellers are likely to step in with a defined risk above the swing high to fade the gains of the last week and target a new low.
On the 4 hour chart, we can see more closely the resistance zone around the 4375 level. We can also notice that the price is overstretched even on this timeframe. In fact, from a risk management perspective, the buyers would be better off to wait for a pullback instead of chasing the rally at these levels.
On the 1 hour chart, we can see that we have a pretty good support zone around the 4315 level where we can find the confluence with the lower bound of the channel, the trendline, the red 21 moving average and the 38.2% Fibonacci retracement level. This is where the buyers are likely to pile in with a defined risk below the trendline to position for a breakout of the resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets and extend the drop into a new low.
Upcoming Events
This week is pretty empty on the data front with just the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment on Friday. The market is likely to focus on the past week events and will be eager to see the US Jobless Claims on Thursday given the recent weakness in the labour market data.
SPX with the index rallying for five consecutive trading days. The bulk of the rally came after the FOMC rate decision where the Fed left interest rates unchanged and Fed Chair Powell delivered less hawkish than expected remarks. The S&P 500 then extended the gains into the weekend after the NFP report missed forecasts and the ISM Services PMI came lower than expected.One may think that the stock market sees a soft landing and the fall in Treasury yields is a good thing. Unfortunately, Treasury yields fell likely because the bond market sees more weakness to come in the next few months given the softening in the labour market. So, the rally we’ve seen out of the disappointing data is likely to be misplaced and the market might correct that soon.
On the daily chart, we can see that the S&P 500 reversed two weeks of losses in just a week, but the rally is now very overstretched as depicted by the price distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
We can also see that the price has come into a strong resistance zone where we can find the previous swing high and the 61.8% Fibonacci retracement level. This is where the sellers are likely to step in with a defined risk above the swing high to fade the gains of the last week and target a new low.
On the 4 hour chart, we can see more closely the resistance zone around the 4375 level. We can also notice that the price is overstretched even on this timeframe. In fact, from a risk management perspective, the buyers would be better off to wait for a pullback instead of chasing the rally at these levels.
On the 1 hour chart, we can see that we have a pretty good support zone around the 4315 level where we can find the confluence with the lower bound of the channel, the trendline, the red 21 moving average and the 38.2% Fibonacci retracement level. This is where the buyers are likely to pile in with a defined risk below the trendline to position for a breakout of the resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets and extend the drop into a new low.
Upcoming Events
This week is pretty empty on the data front with just the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment on Friday. The market is likely to focus on the past week events and will be eager to see the US Jobless Claims on Thursday given the recent weakness in the labour market data.
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