The index is currently trading in between a long-term bottom at 6212.69 and a key retracement zone at 6483.01 to 6566.52. Not a significant area on the charts, but one with plenty of room to try to form a support base.
The most important technical development is that the SPX is trading on the bearish side of both the 200-day moving average at 6638.17 and the 50-day moving average at 6791.98. As long as the index remains in this position, traders are likely to be in “sell the rally” mode. And there is plenty of room to the downside if yesterday’s low at 6316.91 fails.
Furthermore, I believe there are plenty of shorts in the market that would still have to cover before we’ll even see a constructive support base.
Powell Stopped the Selling and Shifted Rate Expectations
Fundamentally, I think Fed Chair Powell’s comment that rates are in a good place and there is no urgency to move higher, even with oil prices rising, may have stopped the selling on Monday. His remarks have already shifted rate hike expectations and traders are now pricing in very little chance of a hike this year.
The move has already impacted the market. As rate pressure eased, buyers stepped back in, especially in growth and tech stocks, which had been under pressure all month.
The second factor supporting the SPX today is geopolitical. In my opinion, reports that Trump is open to winding down the war with Iran are helping to lift sentiment across all the major indexes. I don’t think that investors are thinking about the end of the war today, but rather the thought that tensions could be eased has been enough to bring in some fresh buyers.