Last week, we got some risk aversion in the market as the tensions in the Middle East intensified. In fact, going into the weekend the bearish momentum increased as ABC news reported that the Israeli military got the "green light" to move into Gaza whenever it was ready. Since we haven't seen any ground offence over the weekend, we might see a relief rally today.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 broke out of the channel and sold off into the key support around the 4194 level. This area will be important for market participants because a break to the downside would open the door for a much bigger fall towards the 3808 level. We can expect the buyers to step in here with a defined risk below the support to position for a rally into new highs.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that since breaking below the key 4331 support the S&P 500 started to sell off on last Thursday and Friday, but the price got overstretched to the downside as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we are now around the previous lows and that’s where we can expect the buyers to step in for a relief rally. The sellers, on the other hand, will want to lean on the trendline where we can find the confluence with the 38.2% Fibonacci retracement level and the red 21 moving average. If the price rises above the trendline and the broken lower bound of the channel, the bearish setup will be invalidated, and the buyers will have even more conviction to target new highs.
Upcoming Events
Tomorrow, we will get the US PMIs and the market might not like bad figures given the fragile risk sentiment. On Thursday, we will see the US Jobless Claims data with Continuing Claims recently showing some softness in the labour market. Finally, on Friday, we will get the US PCE report, which is not expected to change anything for the Fed at this time.
See the video below
