S&P 500 Tries to Capitalize After Last Week's Turn

S&P 500 Talking Points:

US equities came into last week in full panic mode, and sellers continued to push on Tuesday and Wednesday.
Bulls took control and Thursday and drove right back to resistance in the 5350 zone, driving a breakout on Friday that has so far held through the Sunday night open.
I’ll be looking into these setups in the Tuesday webinar and you’re welcome to join, click here for registration information.

It’s been a change-of-pace for US equities over the past week as panic has pushed back to behind the scenes. Fresh lows were being set this time a week ago to go along with a deepened sell-off in the USD/JPY pair. And the turn was far from automatic, as bounces on Tuesday and Wednesday were faded aggressively.

But – as highlighted in these pieces those sell-offs were showing a diminishing quality as a series of higher-lows was building. On Thursday, bulls took control to drive back to the 5350 resistance zone, and then on Friday they pushed ahead to set a fresh near-term high.

For this week, inflation takes center-stage with the release of PPI on Tuesday and CPI on Wednesday. Paradoxically, this may be a backdrop where significantly lower readings of inflation bring a bearish drive for equities as that would be sign of a slowing US economy which could further compel a rally into Treasuries. And if rates are quickly falling there’s an opportunity cost for chasing stocks, especially after a sizable bounce late last week.

For Monday however, bulls retain control after the late-week swing and it’s the 5432 level that sticks out as important. This was support on two occasions before sellers drove the breakdown and as prices work back-up, that’s a big level of consideration. Before that comes into play, the 5,400 level presents resistance potential; as does the 5,500 level of prior support.

Support structure is in-place given last week’s two-way price action. The 5342-5357 zone is of particular interest given how many cases of resistance showed and 5328 is just below that, which helped to set the Friday low. Below that, 5300-5310 is of importance. Below that, there’s prior resistance/support swings at 5279, 5264 and then 5236 before key support at 5200 comes back into play.

Resistance:

R1: 5400

R2: 5432.50

R3: 5500

Support:

S1: 5342-5357

S2: 5300-5310.50

S3: 5264-5279.50

S4: 5197.50

S&P 500 Futures Hourly Price Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist

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