SP500 Correction Ahead

New York stock exchange
.05 Apr 2024
author avatar image Andreas Thalassinos

Table of Contents

Briefing on SP500

  • Title: SP500 Correction Ahead
  • Financial instrument: SP500 Index
  • Timeframe: Daily
  • Session: London
  • Trend: Up
  • Momentum: Down
  • Trend Confirmation: Simple Moving Average(EMA), Momentum Oscillator, Moving Average Convergence/Divergence(MACD), Relative Strength Index
  • Support Levels: 5512.76, 5179.23, 5154.05 
  • Resistance Levels: 5237.94, 5271.47, 5296.65, 5330.18
  • Trading Strategy: Buy on Breakouts, Buy on Dips

High Impact Economic Events

  • Friday, April 5, 12:30 pm (GMT+0), CAD: Employment Change
  • Friday, April 5, 12:30 pm (GMT+0), CAD: Unemployment Rate
  • Friday, April 5, 12:30 pm (GMT+0), USD: Average Hourly Earnings m/m
  • Friday, April 5, 12:30 pm (GMT+0), USD: Non-Farm Employment Change
  • Friday, April 5, 12:30 pm (GMT+0), USD: Unemployment Rate

Trend Analysis for SP500

SP500 price chart showing the upward trend, the downside momentum along with support and resistance levels filtered by oscillators.

The price of the SP500 Index has exhibited a significant uptrend since December 27, when it formed a Bullish Harami reversal pattern after reaching a daily trough of 4102.40. Subsequently, the price managed to close decisively above the 50-period moving average. At the same time, the Momentum oscillator emerged above its 100-baseline mark, confirming the upward bias. The swing that followed on January 11 opened the way for setting price targets based on the Fibonacci423.6% Fibonacci Extension, which was eventually achieved on March 20. Moreover, 5275.70 was recorded as the new all-time high.

This recent price action suggests a continuation of the positive sentiment in the market, with a possible correction to the downside as indicated by the negative divergence between the price and the Momentum oscillator.  

Indicators and Oscillators Analysis

The Relative Strength Index (RSI) currently hovers above the 50-baseline, which suggests that the Index is still on an upward trajectory. However, traders should exercise caution as relying solely on RSI may not be a dependable indicator. Moreover, the Simple Moving Average and the Moving Average Convergence/Divergence (MACD) both confirm the upward movement. Specifically, prices are trading above the Moving Average line, and the MACD is above the zero baseline. Conversely, the Stochastic oscillator has fallen below the 80-overbought territory, and the MACD oscillator has dropped below its signal line, indicating a potential short-term correction to the downside.

Key Resistance Levels for SP500

In the current market scenario, the bulls hold the reins of the SP500 Index, and the corresponding price will likely continue to rally. The initial resistance level is seen at 5275.70, and a further ascent may lead to a breach of this level. If that happens, the next potential level at 5296.65 could come into play. The violation of this level may indicate further potential for additional gains, and the next significant resistance level is estimated to be 5330.18. It is crucial to keep a close watch on these support levels to gauge the future direction of the Index.

R1–>5275.70

R2–>5296.65

R3–>5330.18

Key Support Levels for SP500

In the event that the bears take hold of the market, a potential correction to the downside may yield losses in the future. However, support is likely to arise at various levels. The initial support level is estimated to be approximately 5212.76; subsequently, support is projected to be witnessed at 5179.23 and 5154.05, respectively. These levels of support could pose a challenge to the market’s downward momentum. Nonetheless, with careful consideration of market trends and strict risk management tools, it is possible to navigate these obstacles and mitigate risks.

S1–> 5212.76

S2–>5179.23

S3–>5154.05

Trading Strategy for SP500

Based on the technical analysis, traders may consider adding to their positions above the recent high of 5275.70.

On the other hand, aggressive traders may explore short-term buying opportunities on dips toward support levels, with tight stop-loss orders to manage risk effectively. Additionally, if the bullish momentum persists and candlesticks close above the Upper Bollinger Band, indicating a continuation of the uptrend, traders may take advantage of the rising prices with long positions.

Conclusion

In conclusion, the technical analysis of the SP500 suggests a bullish outlook with the possibility of a short-term correction to the downside, with the SP500 testing critical levels. Traders should closely monitor price action around key support and resistance zones and relevant technical indicators to identify potential trading opportunities and manage risk effectively in the current market environment. 

author avatar image
Andreas Thalassinos

Experienced educator with a demonstrated history of working in the financial services industry. Skilled in Technical Analysis, Market Risk, Asset Management, Stock Market, and Trading Systems. Strong professional with a MSTA by Society of Technical Analysts (UK), CFTe and MFTA focused in Master of Financial Technical Analysis from International Federation of Technical Analysts (USA).