S&P 500 Index Technical Outlook: Still Within the Range

S&P 500, NASDAQ – TECHNICAL OUTLOOK:

• Is the S&P 500 resuming its medium-term downtrend?
• The index continues to remain within its recent range.
• What lies ahead and what are the key levels to watch?

S&P 500 TECHNICAL OUTLOOK – NEUTRAL

Is Wednesday’s slide enough to conclude that the S&P 500 index’s rebound this month is over? Perhaps not.

In recent sessions, the index failed to break above key converged resistance at the late-September highs of 3900-3910 and an internal trendline of a rising channel from the end of September. This was followed by a break below minor support at the October 27 low of 3804 on Wednesday, giving the impression that the nascent uptrend is over. It could well be, given that medium-term downward pressure is intact. On its own however, Wednesday’s fall is not sufficient to conclude that the downtrend is resuming.

S&P 500 Hourly Chart

Chart Created Using TradingView

As the chart above shows, the US benchmark index continues to be guided by a rising channel from the end of September. It may have to break below a series of support levels for the downtrend to resume. The most immediate support is at the October 18 high of 3763, followed by the 200-hour moving average. Stronger support is at the October 21 low of 3647, coinciding with the lower edge of the channel. Only a decisive break below 3647 would negate this month’s upward progress.

S&P 500 Monthly Chart

Chart Created Using TradingView

From a medium-term perspective, the index continues to hover in a downtrend channel from the start of 2022. Moreover, downward momentum hasn’t reversed, keeping the broader bias bearish for the index. Any break below 3647 could pave way towards the October low of 3491, and potentially deeper toward the September 2020 low of 3209.

On the upside, a decisive break above resistance at 3807 could initially open way towards 3915 (the 50% retracement of the August-October fall), followed by the mid-September high of 4119. A break above the August high of 4325 would be needed for the medium-term downward trajectory to change.

— Written by Manish Jaradi, Strategist for DailyFX.com