S&P 500 Technical Analysis – The path of least resistance remains to the upside

Fundamental
Overview

Last week, we got a
pullback in the S&P 500 as the higher than expected inflation readings and
a less dovish Powell weighed a bit on the market.

Despite the recent events
though, the market’s pricing remained largely unchanged at three rate cuts by
the end of 2025. This might be a signal that the market is now fine with the
current pricing, and we will need stronger reasons to price out the remaining
rate cuts.

The only bearish reason we
had for the stock market was the rise in Treasury yields. That’s generally
bearish only when the Fed is tightening policy though not when yields rise on positive
growth expectations.

Right now, the Fed’s
reaction function is that a strong economy would warrant an earlier pause in
the easing cycle and not a tightening. That should still be supportive for the
stock market in the bigger picture considering that Trump’s policies include
tax cuts and deregulation.

If the Fed’s reaction
function changes to a potential tightening, then that will likely trigger a big
correction in the stock market on expected economic slowdown.

For now, the pullbacks look
as something healthy and opportunities to buy the dips.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 dropped below the 5918 support level but bounced back a couple of days later
as the dip-buyers took advantage. As long as the price stays above the 5918
level, we can expect the buyers to pile in to position for a rally into a new
all-time high. The sellers, on the other hand, will want to see the price falling
back below the support to target a test of the trendline.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the choppy price action around the 5918 level as the market
continues to wait for catalysts to push into either direction. There’s not much
else we can glean from this timeframe although the 5918 level will likely act
as a barometer for the sentiment.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have another minor support around the 5930 level. If we get a
pullback, the buyers will likely step in around those level with a defined risk
below them to position for a rally into a new all-time high. The sellers, on
the other hand, will look for a break lower to target a drop into the major trendline.
The red lines define the average daily range for today

Upcoming
Catalysts

Tomorrow, we
get the latest US Jobless Claims figures, while on Friday we conclude the week
with the US PMIs.

This article was written by Giuseppe Dellamotta at www.forexlive.com.