S&P 500 Index: Dancing around ahead of the Fed

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S&P 500 INDEX: DANCING AROUND AHEAD OF THE FED (0900 EDT/1300 GMT)

With Tuesday’s higher close, the S&P 500 index has now put together back-to-back up days for the first time in about a month. This, just ahead of the much anticipated FOMC meeting with results due at 1400 EDT/1800 GMT Wednesday.

Monday’s upward reversal off the 4,062.51 intraday trough came after the SPX essentially tagged support at its May 2021 lows in the 4,061.41/4,056.88 area. This zone was backed up by the rising 100-week moving average (WMA), which now resides around 4,041:

With the developing strength, the weekly momentum picture is improving. In early March, the RSI hit its weakest reading since early April 2020. However, with this week’s bounce so far a slight positive convergence is forming. Thus, traders will be watching to see if this Friday’s ending RSI level holds above last week’s close of 31.5, and in so doing, if the SPX then ends a four-week losing streak.

In any event, the broken 23.6% Fibonacci retracement of the entire March 2020-January 2022 advance at 4,198.70 now presents a hurdle. The SPX hit 4,200.10 on Tuesday before backing away. A more sustained thrust above 4,198.70, confirmed by the weekly close, can clear the way higher with additional resistance at the descending 5-WMA, now around 4,292. The resistance line from the January record high is now around 4,555 on a weekly basis.

On the downside, a weekly close below the 100-WMA can suggest potential for much more pronounced weakness. The 38.2% Fibonacci retracement of the March 2020-January 2022 bull-phase is at 3,815.20 (while the March 2020 RSI trough is at 15.193).

(Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)