S&P 500 Bullish Consolidation Continues

28 mar 2023

Stock markets have been uninspiring so far today, mainly due to the lack of fresh catalysts to encourage market participants to trade. At the time of writing, the markets were holding losses in Europe and US. That said, the losses were limited, and lacked any real momentum. So, we may yet see some bargain hunting later in the session for some downbeat stocks, which could lift the indices. Understandably, some investors are having a hard time to make up their minds on the direction of asset prices. Question marks remain over how the bank crisis will play out, and whether the Fed will hike or hold interest rates at the next FOMC meeting. To make things worse, there isn’t an awful lot on the economic calendar this week until Friday when we will get the Fed’s preferred measure of inflation data. But we did see a gauge of US consumer confidence (CB) unexpectedly improved in March.

All told, the market is basically inside a large consolidation zone, but with a slight bullish tilt thanks to receding fears over banks.

S&P 500 technical analysis

The S&P 500 has been coiling around its 200-day average, suggesting that it is gearing up for a potentially sharp move. The index has poked its head above the bearish trend line on a couple of occasions, but so far unable to show any bullish follow-through. Will that change this week?

The bulls will not want to see the index close below Monday’s low around 3968, and certainly don’t want to see it drift back towards Friday’s low at 3905. On Friday, the S&P and several other global indices formed large bullish hammer candles. The bulls now need to see some upside follow-through above these candles.

So, watch out for a possible move higher above Friday’s high at 3980 to potentially trigger a short squeeze rally.

-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R