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S&P 500 Technical Set-Up Looking Ominous, Hawkish Fed a Headwind

S&P 500 Technical Set-Up Looking Ominous, Hawkish Fed a Headwind

Justin McQueen, Strategist

S&P 500 Analysis and News

  • Technical Structure Looking Ominous for S&P 500
  • Hawkish Powell Increases Headwinds for Risk Appetite

During the final trading session of November, the S&P 500 looks to have formed a gravestone doji, as my colleague highlighted yesterday. This appears when price action opens and closes at the lower end of the trading range. After the candle open, buyers were able to push the price up but by the close, they were not able to sustain the bullish momentum. Therefore, this is typically seen as a bearish signal and thus would suggest that October’s monthly reversal could be somewhat of a bull trap.

S&P 500 Technical Set-Up Looking Ominous, Hawkish Fed a Headwind

How to Trade the Doji Candlestick Pattern

What’s more, the higher high in the S&P 500 had not been confirmed by the RSI, showing a bearish RSI divergence, which adds to the technically weak set-up.

S&P 500 Chart: Monthly Time Frame

S&P 500 Technical Set-Up Looking Ominous, Hawkish Fed a Headwind

Source: Refinitiv

Powell Retires Transitory View

While on the macro front, Fed Chair Powell’s hawkish rhetoric during yesterday’s testimony, whereby Powell stated that it was appropriate to retire the word transitory for inflation, increases headwinds for risk appetite. Particularly now that Powell is on board with the faster taper view, meaning that current market pricing for 2022 rate hikes looks underpriced. As it stands, Fed Fund Futures currently have a rate hike fully priced in for July with a second hike in November. However, with Powell stating that tapering could be wrapped up a few months sooner than mid-2022, I suspect will reprice higher rates in March and May.

FOMC Interest Rate Expectation

S&P 500 Technical Set-Up Looking Ominous, Hawkish Fed a Headwind

Source: Refinitiv

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