This week started like the last one with a broader rally in the markets as the risk sentiment got supported by another lack of a ground operation in Gaza over the weekend and the positive news about a couple of hostages being released. Yesterday, on the other hand, we got the complete reverse with the markets opening lower and selling off for no apparent reason except a reaction to some key resistance levels. The selloff accelerated in the evening as the Israeli PM Netanyahu said that they were preparing for a ground invasion. Will we see another selloff into the weekend?
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that after a brief bounce at the beginning of the week, the S&P 500 fell back to the key support around the 4194 level. We can also notice that we have a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the buyers are likely to step in with a defined risk below the level to position for a rally into the trendline around the 4300 level.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a divergence on this timeframe as well. The sellers will want to see the price breaking lower to increase the bearish bets and start eyeing the 3800 level, but they will have a much better risk to reward setup around the 4300 level. In fact, we can see that we have the confluence with the trendline, the Fibonacci retracement levels, the broken lower bound of the channel and the red 21 moving average.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that that the S&P 500 got rejected from the resistance around the trendline where we had also the 38.2% Fibonacci retracement level and the red 21 moving average for confluence. The buyers will want to see the price breaking above the trendline to gain more conviction for a rally into the 4300 level, although the fundamentals do not support such a move at the moment.
Upcoming Events
Today, we will see the US Jobless Claims data with the market likely focusing on the Continuing Claims figures as they’ve been recently showing some softness. The market may not like bad data given the fragile risk sentiment. Tomorrow, we will get the US PCE report, which is not expected to change anything for the Fed at this point in time.
See the video below
