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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Market update: S&P 500 faces crucial resistance - a technical and fundamental forecast

The S&P 500, after early gains, confronts pivotal resistance amid inflation and rate hike concerns. Key technical levels and Fed decisions may dictate its next moves, highlighting a critical market juncture.

Source: Getty

Following a robust start to the year, the S&P 500 experienced a significant downturn throughout the first three weeks of April. Finding support near 4,960, the index has seen a modest rebound in recent days. However, this upward movement may encounter a strong ceiling near the 5,165/5,185 range. This zone presents several technical obstacles, including the 50-day simple moving average (SMA), a short-term descending trendline, and the 61.8% Fibonacci retracement level from April's decline.

Given the S&P 500's proximity to confluence resistance, short positions in the index look compelling. Rising inflation risks and expectations that the Federal Reserve will have no choice but to keep interest rates higher for longer to achieve price stability reinforce the bearish outlook for risk assets in the near term, at least from a fundamental standpoint.

Navigating S&P 500's potential reversal: from resistance to record highs

If the bearish reversal scenario plays out and prices are rejected at the 5,165/5,185 resistance, a pullback towards April's swing low could be on the horizon. While a retest of this region might offer temporary support, a decisive breakdown would signal a potential extension toward 4,855. Further losses from this point onward would shift focus to the 200-day simple moving average near 4,725.

Despite a seemingly strong bearish thesis, traders should exercise caution and avoid fighting against prevailing price action. On that note, if the S&P 500 remains on a recovery path and pushes past the 5,165/5,185 ceiling convincingly on a daily closing basis, the short strategy would lose its validity. Such a breakout could reignite bullish sentiment, opening the path toward 5,260, with the possibility of revisiting the record high also in the cards.

S&P 500 technical chart

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It 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. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It 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. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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