S&P 500 Technical Analysis – This breakout is a bad omen for the bulls

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
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

This article was written by FL Contributors at www.forexlive.com. Source