OUTLOOK FOR US SHARES:
- The S&P 500 is experiencing a strong recovery after last week’s punitive sale
- Despite positive sentiment on Wall Street, US equities remain biased to the downside, including the top stock benchmarks
- Markets’ attention will turn to Powell’s congressional testimony Wednesday and Thursday
Most read: Dow Jones, S&P 500 and Nasdaq 100 Outlook for the coming week – does not look good
After losing nearly 6% last week and posting its worst weekly performance since 2020, the S&P 500 rose Tuesday, backed by improve the mood and possibly rebalancing activity at the end of the quarter. In the early afternoon trading, the benchmark stock index rose 2.4% to 3,762, although it has risen as much as 2.85% in the morning.
Dip buyers are trying to take advantage of the recent weakness in equities and extreme oversold conditions to pick up cheap and beaten stocks ahead of a possible recovery in the hope that the worst may be over for now, at least until the next batch, if important financial data and corporate earnings roll around.
While the risky mood on Wall Street is welcome, it is The S&P 500 remains trapped in a bear market and maintains a negative bias based on technical signals as well as fundamental conditions. From a historical point of view, the S&P 500 has endured 11 bear markets since 1950. After first meeting this condition, the index typically fell for another 1.5 months on average, before settling in the cycle and beginning to rise.
With a focus on Tuesday’s price action, it’s important to emphasize that there will always be short rebounds and tearing rallies at any bear market before the next leg below develops. With that in mind, traders should exercise caution to avoid getting caught on the wrong side of the trade again, especially given that there have been several false signals and dead-cat bounces in 2022.
Looking ahead, there are no major financial releases on the US calendar for the next few days, however Fed Chairman Powell expected to appear before Congress on Wednesday and Thursday to present the bank Half-year report for monetary policy. Traders should carefully analyze Powell’s comments for clues about the aggressiveness of the tightening cycle in light of four decades of high inflationwith the understanding that any hawkish remarks will be bearish for stocks.
S&P 500 TECHNICAL ANALYSIS
The S&P 500 fell sharply last week, setting a new low in 2022, but failed to break decisively below cluster support, which ranges from 3,700 to 3,665. If this area holds in the short term, the rebound may have legs, but to have confidence that the worst is over and that this is not another dead-cat bounce, prices must climb above the resistance at 3,810 and regain it psychological 4,000 level. On the other hand, if sellers regain control of the market and push the index below 3,700 / 3,665, all bets will be rejected. Under this scenario, downward pressure could accelerate and pave the way for a move towards the 3,500 range, a key floor created by the 50% Fibonacci retracement of the 2020/2022 rally.
S&P 500 TECHNICAL SCHEDULE
S&P 500 daily chart prepared using TradingView