The chart on the left shows FXCM's S&P 500 CFD, SPX500. Yesterday's low of 3,859.73 is a 19.9% decline from January's index all-time high. Rounding to 20%, one may debate whether the S&P 500 is into an official bear market. Perhaps its saving grace is that the SPX500 is off its low and is currently trading around 3,973; 17.6% off the January high and dangerously close to that 20% bear market threshold.
The chart on the right is the SPX500 hourly chart. The index found support at the S1 pivot and has bounced as today's sentiment swivels to risk-on. The hourly stochastic has moved above 80 (green rectangle). The bullish momentum is likely to hold as long as this level maintains.
For us, the first level of concern is the R2 resistance pivot, which overlaps with price resistance (orange shaded area). The index may battle to overcome this level. However, if it does, the real test, in our opinion, is at the R3 resistance, around the 4,150 level. Again, there is price resistance and a 61.8% Fibonacci level in confluence here. If the RSI is also overbought (blue arrow), the shorts may be looking to target this level for the next round of selling.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.