Last week, the S&P 500 Index (SPX) surged to the 7,150 level, hitting a new all-time high. This rally was initially driven by two key factors: the unfolding earnings season and rising hopes for another round of US-Iran peace talks. But not everything went according to plan: no agreement was reached, the Strait of Hormuz remained blocked, and crude prices jumped above $100 per barrel once again. These headwinds are currently dampening market activity, limiting excessive risk-taking, and setting the stage for a potential short-term downward reversal.
From a technical standpoint, we see a solid resistance zone between 7,140 and 7,150. SPX has already backed away from these levels three times, and at present, there aren't enough catalysts to break through. The tide is slowly turning in favor of sellers.
Momentum indicators also point to a high likelihood of a looming decline in the S&P 500. The Relative Strength Index (RSI) is currently swimming below the critical 50 threshold and diving deeper. Meanwhile, the Moving Average Convergence/Divergence (MACD) indicator has just slipped into negative territory. In other words, bears are running the show. What’s more, there are no signs of oversold conditions on the horizon, leaving ample room for further downside in the index. The next target could be the psychologically significant 7,000 level.
The final recommendation:
— Sell SPX at the current price, aiming for 7,000 within a couple of weeks.
— Place a Stop Loss order at 7,160, just above resistance, to manage risks if the market moves against us.
This content is for informational purposes only and is not intended to be investing advice.
