S&P 500 – New medium-term low: Is the panic over?

The S&P 500 index accelerated its sell-off, as it broke below the 3,800 level yesterday. The market is frightened by tomorrow’s FOMC Statement release – is it getting closer to a bottom?

The broad stock market index lost 3.88% on Monday, following its last week’s Thursday’s-Friday sell-off of more than 5%. Yesterday’s daily low was at 3,734.30. The S&P 500 index was 1084.3 points or 22.5% below its Jan. 4 record high of 4,818.62.

There’s still a lot of uncertainty and worries about inflation data, tightening Fed’s monetary policy and the Russia- Ukraine conflict. The market will be now waiting for tomorrow’s FOMC Rate Decision announcement. This morning the S&P 500 index is expected to open 0.6% higher following Producer Price Index release, and we may see an attempt at retracing some of the sell-off.

The nearest important resistance level is now at around 3,800-3,850, marked by the previous support level. The resistance level is also at 3,900. On the other hand, the support level is at 3,750. The S&P 500 index broke below its late May local low, as we can see on the daily chart.

Futures contract – Below the previous lows

Let’s take a look at the hourly chart of the S&P 500 futures contract. It was trading within a consolidation above the 4,080 level last week, and on Thursday it broke lower. Yesterday the market broke below its previous lows. However, we may see a short-term upward correction here.

Conclusion

The S&P 500 index will likely open 0.6% higher this morning and we may finally see a rebound after a three-day-long sell-off.

Investors will be waiting for the Wednesday’s FOMC’s interest rate decision release.

Here’s the breakdown:

• The S&P 500 index accelerated its sell-off on Monday, as it lost almost 4%; we may see a rebound this morning.

• In our opinion, no positions are currently justified from the risk/reward point of view.

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