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The S&P 500 stock index has been on a downtrend since the start of the year when it bounced lower from the 4,800 mark.

Six months and several bajillion points later, some traders believe that the index is due for a reversal.

And why not? S&P 500 has been showing higher highs and higher lows since mid-June, enough to appreciate by almost 15% from its 2022 lows.

Is it really just a bear market rally if it’s already up by almost 15%?

U.S. companies are also showing signs that gloom and doom predictions may be overblown. The majority of S&P 500 companies have already reported their Q2 earnings and a good number topped the markets’ revenue and earnings expectations.

But that was last week.

S&P 500 Index (SPX500): Daily

S&P 500 Index Daily Chart

S&P 500 Index Daily Chart

This week, traders are worrying that Friday’s much better than expected (read: inflationary) NFP report has weakened the case of a “dovish pivot” for the Fed in 2023.

As long as there are signs that we haven’t seen “peak inflation,” the Fed can continue to raise rates and maybe choke corporate profits and economic growth.

This week’s U.S. CPI reports may dictate overall market sentiment.

S&P 500 is now consolidating just under 4,200, which lines up with the daily chart’s 100 SMA.

Not only that, but current prices also align with the 50% Fibonacci retracement of the last major downswing and a key inflection point back in March, May, and June.

Consistent trading above the 100 SMA could lead to new multi-month highs for S&P 500. We could even see a trend line retest! If the index busts through this key resistance zone, then it may hit areas of interest closer to the 200 SMA.

On the other hand, a downside breakout from the current consolidation would support talks of rallies in bear markets.

S&P 500 could gain momentum below 4,080 and make new August lows. Yipes!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.