It looks like the S&P 500 is about to bounce off an area of interest!
Will the reversal gain traction from here?
If so, the equity index could set its sights on these next downside targets.
S&P 500 Index (SPX500) 1-hour Chart by TradingView
Remember that break-and-retest setup we were watching on this index last week?
Well, it looks like the former support zone is already holding as a ceiling, so I’m looking at where price could go from here.
The Fibonacci extension tool shows the levels that sellers might be aiming for. The 38.2% level looks like a potential take-profit point, as it lines up with a support-turned-resistance area around 3,950.
Stronger selling pressure could take the S&P 500 index back down to the swing low near the 76.4% extension at 3,825 or all the way south to the full extension at 3,760.
Stochastic is just starting its descent from the overbought region to reflect a return in bearish vibes, which might stay in play until oversold conditions are met.
Also, the 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside or that the selloff is likely to pick up. The 200 SMA appears to be holding as dynamic resistance at the broken long-term rising trend line and the short-term descending trend line, too.
U.S. equities initially had a bullish reaction to the FOMC decision to hike by only 0.25%, but higher-yielding assets were quick to return these gains and more.
Banking stocks were still on shaky footing, as Powell‘s remarks did very little to reassure investors. The Fed head honcho even admitted that tighter credit conditions for households and businesses might be in the cards, likely weighing on economic activity.
Now that sounds pretty ominous for the U.S. stock market, doesn’t it?
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