S&P 500 Technical Analysis – The path of least resistance stays to the upside

Fundamental Overview

The S&P 500 recently broke out of a tight range following lower than expected US inflation figures and strong US activity data. This positive growth impulse without concerning inflation developments (as of now) is keeping the upside intact given the lack of bearish drivers.

Looking ahead, we have the
August 1 tariff deadline that might keep the markets more on the
defensive, but it certainly wouldn’t be the first time that Trump
postpones a deadline or tones down his threats. So, the probabilities
are more skewed for positive outcomes.

The risks ahead include another growth scare from
tariffs or a more hawkish repricing in interest rates expectations. In the bigger picture
though, given that the Fed’s reaction function remains to either wait more or
cut, the market should eventually get back to its upward trend.

S&P 500 Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that after breaking out of the range, the S&P 500 retested the resistance-turned-support before another impulse to the upside. The price has now pulled back to the support again and this is where we can expect the buyers to step in with a defined risk below the support to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to pile in for a drop into the 6,246 level next.

S&P 500 Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the most recent swing low at 6,323 could act as support. In fact, the zone between the 6,323 and 6,333 level is going to act as support for dip-buyers. The sellers, on the other hand, will look for a break lower to invalidate the bullish setup and start targeting new lows. The
red lines define the average daily range for today.

Upcoming Catalysts

Today we have Fed Chair Powell speaking
but given the blackout period, he won’t comment on monetary policy. On
Thursday, we get the latest US Jobless
Claims figures and the US Flash PMIs.

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This article was written by Giuseppe Dellamotta at investinglive.com.