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Asset Watch

Will technical reinforcements save the S&P 500?

 

Thursday, September 1 2022

With investors still shell-shocked from Fed Chairman Jerome Powell’s hawkish Jackson Hole speech, the negativity has continued this week. Minneapolis Fed President Neel Kashkari poured gasoline on the fire on Aug. 29 when he said:
“I was actually happy to see how Chair Powell’s Jackson Hole speech was received. People now understand the seriousness of our commitment to getting inflation back down to 2%… I certainly was not excited to see the stock market rallying after our last Federal Open Market Committee meeting.”
So, with Fed officials spoiling the bulls’ fun, the S&P 500 has declined by more than 8% from its recent intraday high. However, could a selling reprieve come sooner rather than later?

The decline began after investors rejected the S&P 500’s attempt to reclaim its 200-day moving average. Even though the 50-day MA held on Aug. 29, the index closed below the key level on Aug. 30. That said, the S&P 500 has lost its 50-day MA before and recouped it soon after, meaning the days ahead are critical.

 

If the selling continues, next-level support is 3,904. The level is near the May closing lows and the June and early July closing highs. As a result, it implies a roughly 2% downside from the Aug. 30 close. After that, the next key level is near 3,741, showing a more than 6% decline.

 

However, with the U.S. economy still relatively strong, will the bulls rally the troops and put up a spirited fight?


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