The S&P 500 Index is testing a verrry closely-watched technical resistance!
Uncle Sam’s S&P 500 stock index (SPX) started the year on a strong note, rising from a consolidation near 3,800 to trade closer to the 4,000 psychological zone.
What makes the chart more interesting this week is that it’s trading juuuuust above the 200 SMA on the daily time frame. That hasn’t happened consistently since April 2022!
More importantly, traders around the world consider the 200 SMA to be a bellwether. Stocks (or indices) trading above the 200 SMA are believed to be in a bull cycle, while assets trading below the moving average are in a bear cycle.
S&P 500 Index (SPX): Daily
This time around, the 50 SMA is also as close to the 200 SMA as it had ever been since the bearish crossover back in March. The 50 SMA crossing above the 200 SMA would only help the bullish cycle narrative.With SPX testing the 200 SMA for a FIFTH time in months AND markets trading a risk-friendly trading environment, many are looking to see if the retest will herald a longer-term bullish run.
Before you buy U.S. stocks like there’s no tomorrow, though, you should note that SPX is also testing a key trend line resistance that’s been solid since January 2022.
Stochastic is also on the bears’ side with an overbought signal though the oscillator hasn’t turned lower just yet.
Watch the next candlesticks to see if SPX can sustain its prices above the 200 SMA!
The U.S. will be printing its producer prices and retail sales numbers, which could help gauge how hawkish the Fed will be in its next meetings.
If traders price in more tightening from the Fed, or if this week’s earnings reports highlight recession fears, then SPX could get rejected at the 200 SMA and drop back to its December levels. It could even extend its downtrend!
But if markets continue to price in China’s reopening theme, or if traders continue to be bullish about major central banks slowing down their tightening plans, then we could see SPX break above the key technical levels that we’re watching.
SPX could jump to the 4,100 or 4,200 zones before seeing sustained bearish pressure!
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