The S&P 500 is facing strong resistance at 4200, but there is no sign of a breakout yet. The index has been in an uptrend since the fourth quarter and, since the March dip, has enjoyed more than a 10% return. However, momentum seems to be easing as 4200 acts as a wall in front of the S&P 500. The relative momentum index is closing in on its signal moving average for a sell signal, which has been working perfectly since 2021. Yesterday’s volume also gives a red flag, being the lowest of 2023 as resistance is being tested. If this continues, it might trigger at least a small correction to the lower line of the uptrend channel unless a breakout occurs over 4200 first. Over the medium term, however, breaking the downtrend and continuing the current uptrend, the technical outlook looks very promising. Any correction could be a buying opportunity for more advances unless the uptrend fails.
A possible short-term correction could be compatible with the fundamentals too. The massive gap between the market’s rate expectations and FED members’ forecasts has gotten smaller in recent weeks. Also, debt limit talks will begin shortly, and the FOMC is fast approaching, where Powell will probably repeat that “they are not seeing any rate cuts this year” again. But over the medium term, debt limit talks are most likely to be resolved while recession risks are falling with strong PMI and PMI forecasts globally. The FED will most likely start to cut rates in a matter of months too, creating a very good atmosphere for a medium-term bullish run.
