S&P 500 Chart and Tools Analysis: Bullish bias may be deceiving given the dark past

• The S&P 500 index has declined in 8 of the last 9 interest rate decisions.

• A rate cut - as occurred in 1995 – would be perceived as an adverse signal by markets.

 

After five idle days on the S&P500, purchases have increased on Tuesday and dragged the index up to 2,932 – the top of the short term bullish channel.

The FXStreet technical confluence detector on the daily range shows that the most important resistance is at 2,944 while the main support is a few points below the current price. In addition, S&P500 is supported at 2,894, 2,881 and 2,818.

FXStreet's technical indicator shows that the trend remains bearish in the daily range in an overbought environment with expanding volatility.

This configuration presents us with a scenario that tends to move lower and can move with an increasing daily range amplitude. The bullish scenario suggests increased overbuying, and if it does not reach the historic high of 2,960, it is unlikely to come out of the bearish profile.

 

S&P 500  Hourly Chart

The S&P500 is currently trading at 2,921, moving between the first resistance level at 2,930 and the first support at 2,908.

Above the current price, the second resistance level is at 2,940 (upper parallel bullish trend line), then the third one is at 2,960 (upper parallel bullish trend line extended and historical high).

Below the current price, the second support level is at 2,868 (price congestion support), then the third one is at 2,830 (lower parallel bullish trend line).

 

The MACD on the 1-hour chart shows a cross profile on the downside but with little inclination and openness. The pattern suggests a possible bullish cross in development.

The DMI on the 1-hour chart shows the bulls losing strength and getting below the ADX line, while the bears have not stopped increasing their strength since mid-session on Tuesday. The bearish side of the market has interpreted the rally as a selling opportunity.

 

The Federal Reserve will shortly announce its highly anticipated decision. Fed Chair Powell – under heavy pressure from President Donald Trump and markets – will then face the press.

The market will be more attentive to language and message than to the interest rate, which is expected to remain unchanged.

However, in the face of the apparent scenario conducive to facing the final attack at 3,000, statistics bring us back to reality. In eight of the last nine interest rate decisions, the index has dropped.

Besides, the current situation is reminiscent of 1995, when the Fed – then presided over by Greenspan – facing low rates with markets at historic highs has cut rates only to see market dropping by no less than 10% in the following weeks.