The recent drop in the S&P 500 has caught our attention, largely due to growing concerns that the Federal Reserve may not deliver an interest rate cut in December.
Inflation data combined with mixed signals from the Fed have left markets uncertain about the timing of future policy easing, fueling selling pressure as expectations for a near-term pivot diminish.
For the first time in 100 days, the S&P 500 broke below its 50-day moving average. Historically, breaks below this level have been followed by positive returns, averaging 0.49% after one day, 0.85% after two days, and increasing to 3.54% over the course of one month.
The probability of gains one week and one month out remains notably high at 78% and 83%, respectively.
From a technical perspective, the chart exhibits characteristics of a Bump-and-Run Reversal Bottom, a pattern regarded as the most successful among major technical setups, according to Bukowski.
Moreover, an open gap near 6,850 could serve as a magnet for price action, potentially guiding the market as it attempts to rebound. The support level at 6,656 aligns with the 0.5 Fibonacci retracement from the September low to the October high, adding further technical strength to this area.
Suggested Setup
- Long: 6,656 to 6,672
- Stop Loss: 6,625
- Take Profit: 6,750
- Risk/Reward: 1.66
Read More: PLTR Price Prediction: Palantir Finally Shows Short Setup After 3-Year Run
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