US stock index S&P 500 tests technical support area ahead of key data releases this week!
Will this week’s events contribute to extending the index’s upward trend?
Or are the bears preparing for a hard landing?
S&P 500 (SPX500) Daily Chart by TradingView
A combination of concerns about global growth, a recovering US dollar and some profit taking have helped push the S&P 500 lower in the past few days.
The index, which hit new record highs of just under 5,700 points in mid-July, is now trading near the 5,450-point level.
This is located around the pivot point line, the 50% Fibonacci retracement of the recent rally, and trend line support that has been in place since late 2023!
Is the stock market taking a break?
Remember that directional biases and volatility in market prices are usually driven by fundamentals. If you haven’t done your homework on market sentiment and US stocks yet, it’s time to check out the economic calendar and stay up to date with the daily fundamental news!
In the next few days, we’ll see another batch of US earnings reports including those from Apple, Amazon, Alphabet and Meta Platforms — four of the closely watched “Magnificent 7.” Earnings from Pfizer, Ford and ExxonMobil could also add to stock volatility.
Meanwhile, US reports such as the JOLTS job openings report and the Federal Reserve’s monetary policy decision could influence the overall risk-on behaviour in the markets.
Risk-friendly headlines, coupled with bullish candles above trendline support, expose the stock index to potential upside momentum all the way to the 5600 turning point if not previous highs below 5700.
But if this week’s themes encourage risk aversion or selling of stocks, the US500 could extend its downtrend.
Look for bearish candles below the 5,400 level or sustained trading below the trend line and 100 SMA support areas for evidence that we are heading into a long-term bearish swing.
If the trend line support is broken, the S&P 500 could drop back to previous areas of interest at 5,325 or 5,235.
No matter how you trade this setup, make sure you follow your trading plan and use the best risk management moves so you can trade another day!