The S&P 500 is forming a reversal pattern on the 1-hour chart!
Will this lead to the end of a short-term uptrend?
As you can see on the 1-hour chart, the stock index has been in an uptrend since mid-March when concerns over the global banking structure started easing.
It also helped that the banking crisis fueled speculations that the Fed would stop tightening and even cut its interest rates in less than a year.
S&P 500 Index (SPX500): 1-hour
But that was last month.
Since then, Uncle Sam printed weak leading indicator reports that point to a recession. Yipes!
On a technical basis, the S&P 500 also failed to make new April highs just as the index hangs around a multi-month resistance zone.
In fact, yesterday’s downturn from the 4,120 levels formed a potential Double Top pattern on the 1-hour chart!
Are we looking at the start of a reversal? Or are bulls and bears just taking a breather before they push for new highs?
To get a clearer picture of the Fed’s policy plans, traders will look at upcoming data releases like today’s U.S. CPI report, the FOMC meeting minutes, and post-crisis earnings reports from the major banks for clues.
Focus on easing inflation, stronger-than-expected earnings, and overall risk appetite could push SPX to new April highs and maybe even to its February highs above 4,200.
But if this week’s headlines support more tightening (and deeper recession) in the U.S., then U.S. stock prices could see sustained selling.
Look out for a break below the Double Top “neckline,” trend line support, or the 100 SMA for confirmation of a sustained bearish downswing!
