The over 1% drop in the S&P 500 yesterday saw a daily close below its 50.0 Fib retracement level of the swing higher from October, seen at 3,796. That has been a level limiting further downside in the past week, before we headed into the Christmas break.
But as we move towards the turn of the year, sellers are taking charge and pushing the agenda, in search of the next downside leg for stocks.
The double-top pattern around 4,100 has a downside target of around 3,760 and that will be the next level to be mindful of before we look towards the November low at 3,698 for the S&P 500 index.
As much as stocks had been hopeful for a major rebound on the back of a Fed pivot of sorts, we're still not quite at the point where the Fed and other major central banks are resigned to putting a complete stop to their respective tightening cycles.
Much like how the dollar has a few key considerations to take into account here, it is the same story for equities as well.
The inflation outlook remains pivotal but as mentioned here previously, do not brush aside the implications of the technical picture that is playing out at the moment - as also seen above.
