On the daily chart below, we can see that the sellers eventually managed to break below the key support level at 32684. The recent breakout was caused by the collapse of the Silicon Valley Bank on Friday which spread fears of contagion in the banking system and led to risk aversion across the board.
The Treasury and the Fed worked during the weekend on a solution for this particular matter and came up with an emergency lending facility that would protect the depositors and give the banks the chance to convert their long term securities at original value instead of being marked to market. This development pushed the markets up as the futures market reopened and the price rallied all night long.
On the 4 hour chart below, we can see that the overnight rally stalled at the red long period moving average and the trendline. This is a zone where the sellers may be leaning on and the key resistance at 32684 offers a good protection for shorts. The buyers will need to break above the 32684 level if they want to gain control and target the major trendline as the first target.
What comes next though, should be decided by the CPI report tomorrow. The market is currently pricing a higher chance of 25 bps hike at the March meeting and completely priced out the 50 bps chance. A beat across the board in the data may raise odds of the 50 bps hike and push the market lower, while a miss should give the buyers lots of strength to push higher and make new higher highs.
In the 1 hour chart below, we can see that the resistance zone at 32684 is pretty strong. We have confluence of the trendline, the 61.8% Fibonacci retracement level and the above-mentioned resistance. This will be the first line of defence for the sellers. If the buyers break above, the sellers may want to wait for the price to approach the major trendline first before starting to pile in.
