S&P 500 Technical Analysis – Rotation continues to weigh on the market

Fundamental
Overview

The upward momentum in the S&P 500 has been kept at bay recently as the
goldilocks data triggered a strong rotation into small caps stocks with the
Russell 2000 having its best
week in 24 years.

It also looks like the rotation has been driven by hedge funds facing short
squeezes on their small cap hedges as yields come down. This is just internal
market dynamics as the fundamentals have not changed.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that in case we get a deeper pullback, the buyers will find a good support
zone around the 5500 level where we can find the confluence
of the trendline
and the 38.2% Fibonacci
retracement level. The sellers, on the other hand, will want to see the
price breaking below the trendline to increase the bearish bets into the 5200
level next. As of now though, there are no reasons to expect such a big
pullback.

S&P 500 Technical Analysis – 4 hour
Timeframe

On the 4 hour chart, we can
see that we have another minor trendline defining the current bullish momentum.
We can expect the buyers to lean on this trendline with a defined risk below it
to position for new all-time highs with a better risk to reward setup. The
sellers, on the other hand, will want to see the price breaking below the
trendline to position for a drop into the 5500 level next.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we’ve been having a rangebound price action recently as rotation into
small caps stocks kept the momentum at bay. The bias remains bullish
nonetheless and we have key levels where the buyers can limit their risk. The
red lines define the average daily range for today.

Upcoming
Catalysts

Today we have Fed’s Waller speaking while tomorrow we conclude with the
latest US Jobless Claims figures.

This article was written by Giuseppe Dellamotta at www.forexlive.com.