After breaking out of its range, this equity index is finally showing signs of a correction.
Is this our chance to join the trend?
Take a look at the potential pullback levels I’m watching on the 4-hour time frame.
S&P 500 Index (SPX500) 4-hour Chart by TradingView
Thanks to the tech sector rally a few days back, the S&P 500 index managed to bust through the resistance around 4,800!
However, a slew of downbeat earnings reports plus a somewhat hawkish FOMC statement this week triggered a flight to safety and profit-taking from recent equity rallies.
As it turns out, the Fed isn’t exactly eager to cut interest rates in March just yet, reinforcing the “higher for longer” narrative that is keeping market players on edge given slowing global growth conditions.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on U.S. equities, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
The S&P 500 index is now down to the 38.2% Fibonacci retracement, which lines up with S1 (4,851.83), and might still retreat to the 50% Fib near S2 (4,816.56) and the 100 SMA dynamic inflection point.
This faster-moving SMA is still above the 200 SMA to suggest that the uptrend is more likely to gain traction than to reverse. The line in the sand for a correction might be the 61.8% Fib close to S3 (4,788.31) and the rising trend line, as well as the former resistance that might hold as support.
Stochastic is also closing in on the oversold region to hint at exhaustion among bears. Turning higher might signal that it’s time for bulls to charge again, possibly taking the index back to recent highs close to R1 (4,915.35).
Don’t forget that Uncle Sam still has the January NFP report up for release, and any major surprises could boost volatility across asset classes!