US 500 – Strength of Rebound From Friday Low to be Tested
The US 500 bounced 1.4% from its January 2025 lows on Friday, ensuring a volatile week of trading finished on a slightly more positive note than may have been the case earlier in the day. However, the strength of this rally is likely to be put through a stern test in the week ahead. Why?
The week is packed full of risk events, including key US economic data, in the form of the forward-looking ISM Manufacturing (Monday 1500 GMT) and Services (Wednesday 1500 GMT) PMI surveys, the latest update on the strength of the US labour market, provided by the Non-farm Payrolls update (Friday 1330 GMT), and earnings from consumer bellwether Target (before the open Tuesday).
President Trump’s tariffs on Canada, Mexico and China are due to start on Tuesday, which if they happen are likely to see retaliatory tariffs initiated on the US. Then to top it all off, Federal Reserve Chairman Jerome Powell is speaking on Friday (1730 GMT). The topic, the US economic outlook. Wow!
There is, of course, always the potential for unscheduled social media comments from President Trump to factor into the volatility mix, like those last night which sent crypto markets sharply higher for a period, as well as updates on the geo-political situations in Ukraine and the Middle East.
Being prepared is important, and that includes knowing the chart levels and trends as we look at the US 500 this morning.
Technical Update: Friday's Recover in Focus
It has certainly been a sharp sell-off in the US 500 index since the all-time high was registered at 6144 on February 19th. However, it’s probably too early to tell if this represents the first signs of a negative sentiment shift, or as has been the case previously, dips in price are being used as an opportunity to buy a market still within an uptrend.
Potential Support Levels:
The basic definition of an uptrend in price, is a pattern of higher highs and higher lows. This reflects buyers are not only using price weakness as a buying opportunity but are also willing to pay a higher price. It could be argued this suggests positive sentiment has been evident.
While this is no guarantee that this is still the case in the US 500 index, looking at the chart above, this type of positive pattern has been in place since the sell-off in price to the August 5th 2024 low at 5089.
So far at least, the current US 500 index level remains above 5757 which was the January 13th 2025 last correction low of the uptrend pattern, and traders may be watching this level, feeling it might be pivotal for the next trending pattern.
If closes materialise below 5757 over the coming days or weeks, traders may start to feel risks are turning towards a deeper retracement of the August 2024 to February 2025 price strength, with the 38% retracement level of that move providing a potential support focus at 5741, the 50% retracement at 5616, and the 62% point at 5491.
Potential Resistance Levels:
That said, while the January 13th low at 5757 continues to hold any price weakness, it is possible the uptrend pattern in price remains in place. If that’s the case, knowing what resistance levels might be worthwhile monitoring could be helpful.
As the chart above shows, last Friday did see a rally as a reactive recovery to the recent sharp sell-off. These recovery themes are so far being developed further this morning, with the index currently trading above 5952. This level is equal to the 38% retracement of the February price decline.
Now, this price break above this first retracement resistance level does need to sustained on a closing basis, but even then, traders may well focus on a possible higher resistance at 6025/37, which is equal to the 62% retracement and matches the current level of the declining Bollinger mid-average.
It is possible closing breaks above this resistance area are needed to suggest the potential of a more extended phase of price strength, even extension of the current uptrend pattern.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
The week is packed full of risk events, including key US economic data, in the form of the forward-looking ISM Manufacturing (Monday 1500 GMT) and Services (Wednesday 1500 GMT) PMI surveys, the latest update on the strength of the US labour market, provided by the Non-farm Payrolls update (Friday 1330 GMT), and earnings from consumer bellwether Target (before the open Tuesday).
President Trump’s tariffs on Canada, Mexico and China are due to start on Tuesday, which if they happen are likely to see retaliatory tariffs initiated on the US. Then to top it all off, Federal Reserve Chairman Jerome Powell is speaking on Friday (1730 GMT). The topic, the US economic outlook. Wow!
There is, of course, always the potential for unscheduled social media comments from President Trump to factor into the volatility mix, like those last night which sent crypto markets sharply higher for a period, as well as updates on the geo-political situations in Ukraine and the Middle East.
Being prepared is important, and that includes knowing the chart levels and trends as we look at the US 500 this morning.
Technical Update: Friday's Recover in Focus
It has certainly been a sharp sell-off in the US 500 index since the all-time high was registered at 6144 on February 19th. However, it’s probably too early to tell if this represents the first signs of a negative sentiment shift, or as has been the case previously, dips in price are being used as an opportunity to buy a market still within an uptrend.
Potential Support Levels:
The basic definition of an uptrend in price, is a pattern of higher highs and higher lows. This reflects buyers are not only using price weakness as a buying opportunity but are also willing to pay a higher price. It could be argued this suggests positive sentiment has been evident.
While this is no guarantee that this is still the case in the US 500 index, looking at the chart above, this type of positive pattern has been in place since the sell-off in price to the August 5th 2024 low at 5089.
So far at least, the current US 500 index level remains above 5757 which was the January 13th 2025 last correction low of the uptrend pattern, and traders may be watching this level, feeling it might be pivotal for the next trending pattern.
If closes materialise below 5757 over the coming days or weeks, traders may start to feel risks are turning towards a deeper retracement of the August 2024 to February 2025 price strength, with the 38% retracement level of that move providing a potential support focus at 5741, the 50% retracement at 5616, and the 62% point at 5491.
Potential Resistance Levels:
That said, while the January 13th low at 5757 continues to hold any price weakness, it is possible the uptrend pattern in price remains in place. If that’s the case, knowing what resistance levels might be worthwhile monitoring could be helpful.
As the chart above shows, last Friday did see a rally as a reactive recovery to the recent sharp sell-off. These recovery themes are so far being developed further this morning, with the index currently trading above 5952. This level is equal to the 38% retracement of the February price decline.
Now, this price break above this first retracement resistance level does need to sustained on a closing basis, but even then, traders may well focus on a possible higher resistance at 6025/37, which is equal to the 62% retracement and matches the current level of the declining Bollinger mid-average.
It is possible closing breaks above this resistance area are needed to suggest the potential of a more extended phase of price strength, even extension of the current uptrend pattern.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.