The S&P 500 Index (SPX) has taken a slight turn from its previously steady upward trend, closing just below its established bull channel recently. Last Friday mirrored the price fluctuations seen the previous week, marked by significant intraday activities that dipped below both the lower rail of the channel and the 50-day moving average. However, the index managed to regain momentum by closing above the 50-day MA and near the bull channel’s lower boundary.
Currently, SPX demonstrates price behaviors reminiscent of early 2021, marked by temporary dips below the critical bullish channel established between November 2020 and September 2021, which were followed by rebounds at the 50-day moving average. As of the last close, the SPX stood at 6,734.11, a gain of 23 points since October 1, when it closed at 6,711. During the recent government shutdown, which lasted from October 1 to November 13, the index experienced a 179-point peak and a 159-point low, indicating that the market maintained considerable volatility despite a lack of key economic data.
While SPX rebounded to close above the 50-day moving average, it struggled to break past the 6,760 threshold, a significant level that sits 10% above the previous February 2025 high. With the lower boundary of the bull channel and the 30-day moving average also located around 6,760, the SPX now finds itself wedged between crucial support levels and the recent intraday lows in the range of 6,630-6,650.
Looking ahead, the upcoming week is pivotal, featuring earnings reports from major companies such as Nvidia, Home Depot, Walmart, and Target. Additionally, economic indicators regarding employment and inflation are on the horizon, which could influence the Federal Open Market Committee’s potential rate cut decision scheduled for December 10. The U.S. Labor Department announced the September employment report will be released on Thursday, right before market opening.
Recent trends indicate a dip in expectations for a rate cut, with Fed funds futures showing only a 44% probability of a cut compared to 67% the week before. Nonetheless, the SPX has shown resilience, remaining stable despite shifting expectations. Moreover, optimism among option buyers has decreased since the start of the shutdown, with the buy-to-open put/call volume ratio rising modestly from 0.42 to 0.51. Although this shift suggests a cautious market sentiment, the SPX has not significantly declined, reflecting a gradual slowdown in upward momentum.
Market watchers should remain mindful of the significant open interest around the 6,700 and 6,750 strike levels, as the SPX may see pinning action at these points if little directional movement occurs in the coming week. Overall, while the immediate sentiment reflects caution, the market’s underlying resilience suggests that the bulls still have the potential to navigate through this period of uncertainty.