In terms of technical analysis for the S&P500, the major trendline that defined the 2022 bear market has been finally breached. The market keeps on charging higher and higher on expectations that the Fed will end its tightening cycle soon and inflation returns back to target without a significant damage to the economy.

In fact, since November 2022, inflation data have been showing a clear easing in inflation and the labour market data kept on beating expectations.

The problem is that inflation and employment are lagging indicators and the leading indicators have been pointing to something pretty bleak on the horizon, which has been largely ignored by the market.

It might be that until the labour market data do not show a notable weakening, the bulls will have the upper hand. This week there are many economic reports focused on the labour market, so it’s going to be a big one.

The other major risk is that the Fed decides to surprise with a 50 bps hike, although this is very unlikely since they follow market pricing, and they already telegraphed a 25 bps move.

S&P500 Technical Analysis

On the daily chart above, we can see that the major blue trendline that defined the 2022 bear market has been breached. The bulls may now target the first resistance at 4175.

If they manage to extend higher, then the resistance at 4324 will be targeted. If we see the bears smacking the price back down below the blue trendline, that would be a possible major fakeout signal and the start of another big sell off with the support at 1506.

Looking at the 4 hour chart, we can see that the minor upward blue trendline will define the current short-term uptrend from the major downtrend. At the moment, the price is diverging with the MACD, which generally signals a possible pullback or reversal.

If the labour market reports beat expectations again and the Fed doesn’t deliver any surprises, the resistance at 4175 should be reached without issues.

Zooming in to the 1 hour chart, we can see that there are two possible scenarios for the near-term price action: break above the 4108 resistance and the bulls should manage to reach the 4175 resistance, on the other hand, break below the 4056 support and the bears should regain control and target the minor blue trendline.