S&P 500 Bull Run Faces Key Support Test at 5,440 Ahead of Major Economic Data

• S&P 500 Performance: The S&P 500 closed June with a 3.5% gain, continuing a significant bull run since the April low of 4,930. The index has increased over 10% in the last two and a half months, reaching record highs above 5,500.

• Short-term Range: Over the past two weeks, the market has been contained within a sideways range after breaking out of the 4-hour upward trendline channel. It has entered a consolidation phase between key resistance at 5,520 and support at 5,440.

• Daily RSI Returns to Neutral: Bullish momentum has slowed, allowing the daily RSI to return to neutral. The 5,440 level continues to provide support and defend recent gains, crucial for maintaining the bullish trend and preventing a shift to bearish momentum.

• Key Support at 5,440: Attention is firmly on the 5,440-support level with upcoming news this week. This level can restart bullish momentum and keep short-term timeframes pointing upwards. Short-term bullish traders are monitoring for signs of support above this level to initiate new positions.

• Potential Bearish Shift Below 5,440: The support level at 5,440 is crucial. A break and close below this level would shift short-term momentum to bearish, activating a reversal pattern on the 4-hour timeframe and potentially initiating a downward correction on the daily timeframe towards the 45-day exponential moving average channel support area at 5,350.

• Trend Outlook: While the daily trend remains strongly bullish, the current consolidation period acts as a short-term sideways correction. The 5,440-support level will determine if the correction remains shallow or if a break below this key support will trigger a more substantial corrective move towards the key moving average channel last visited at the end of May.

• Historic Low Volatility: Historically, the S&P 500 experiences daily moves over 2% around 5-10 times per year. However, it has now gone over 380 days without a 2.05% decline or a 2.15% gain, representing the longest period of such low daily volatility since 2008. This unusual stability reflects high investor confidence but also raises the possibility of future market turbulence.

• Latest Economic data: U.S. manufacturing contracted for the third consecutive month, according to the ISM manufacturing PMI released on Monday. Signs of cooling inflation and declining manufacturing activity are renewing hopes for a Federal Reserve interest rate cut as soon as September. The market is currently pricing in a 67% chance of a September cut.

• Upcoming Key Events: Key upcoming events that could trigger volatility during the week include JOLTS job openings today and ISM Services PMI tomorrow. The latest FOMC minutes, due tomorrow, will be monitored for any changes in tone following the recent data. The highlight of the week will be Friday’s NFP report. Additionally, Fed Chairman Powell and ECB President Lagarde will discuss monetary policy at the ECB Forum on Central Banking later today, with comments on policy divergence possibly triggering market reactions.

S&P500 4Hour Chart

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