The S&P 500 yesterday fell hard into the close with no clear catalyst. It might have been just profit taking as the market was anyway getting more and more overstretched. The only notable economic release was the US Consumer Confidence report where the data beat across the board. We are now close to the Christmas holidays and liquidity is likely to get thinner which increases the risk of bigger swings. Today the market will focus on the US Jobless Claims figures as the labour market continues to be a key spot to watch for the soft-landing narrative.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 yesterday dropped hard into the close as some profit taking might be unfolding. The index was overstretched anyway, and a pullback was bound to happen at some point. From a risk management perspective, the buyers would have a much better risk to reward setup if they leant on the 4606 level where there’s also the red 21 moving average for confluence.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a good support zone around the trendline where we can find the confluence with the 50% Fibonacci retracement level and the red 21 moving average. The sellers, on the other hand, will want to see the price breaking below the trendline to pile in and position for a drop into the most recent swing low at the 4540.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we are still in the pullback territory, but if the price were to break below the trendline, a reversal would be confirmed, and the sellers will likely increase the bearish bets into the 4540 level.