Death cross pattern in financial sector intensifies risk of further decline in SPX

The S&P 500 Index (SPX) plunged to 6,632.19 last week. Soaring oil prices—fueled by escalating tensions in the Middle East—were the primary catalyst behind the decline. This environment has become a fertile ground for heightened inflation concerns, which, in turn, have derailed market expectations regarding the Federal Reserve’s (Fed) easing cycle.

The financial sector has recently shown an extreme deterioration, shedding 11% since the start of the year. On Monday, a death cross pattern emerged on the chart of XLF—the exchange-traded fund that tracks relative stocks within the S&P 500. This formation is a troubling signal for investors, as financial companies often serve as bellwethers for the broader economy. Therefore, the sector’s weak performance is currently raising concerns about the overall health of the market.

Corporate profit forecasts add another layer of risk. These projections were largely built on the assumption of oil at $60 per barrel—a level that now seems like a distant memory following the recent commodity surge.

The current landscape leaves the Fed with little room to maneuver. At its upcoming meeting on March 18, the regulator is likely to keep interest rates in the 3.50%–3.75% range. Traders have already shifted their expectations for the first cut to September.

The technical setup at the beginning of the week looks mixed. During early trading on Monday, we noted signs of bullish momentum emerging after the prolonged decline in SPX. The 200-day exponential moving average (EMA200) at 6,610.9 was in the spotlight as well. Quotes breached this threshold, though they failed to consolidate below it, suggesting that buyers are still in the game and willing to defend this key level.

That said, a modest rebound cannot undo a broader bearish narrative. The Chaikin Oscillator still sits in the red, forcing traders to remain cautious. This recovery could be a short-lived breather for the market before the downtrend resumes.

Try out the following trading strategy: 

Sell SPX during the current rebound, ahead of the Fed meeting. Place Take profit at 6,500. Set Stop loss at 6,750.

The forecast is valid from March 16 till March 23, 2026.