S&P 500: Bullish Bias Remains But Key Fibonacci Levels Could Trigger Profit-Taking

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S&P 500: Bullish Bias Remains But Key Fibonacci Levels Could Trigger Profit-Taking

• Markets remain resilient as the S&P 500 holds key support levels despite valuation concerns and elevated rate projections.
• Central bank actions dominate the spotlight, with the ECB’s rate decision poised to set the tone for today’s session.
• Traders eye pivotal technical levels for fresh trade opportunities as bullish momentum persists across US indices.
• Discover the top stocks poised to benefit amid the stock market’s surge using InvestingPro’s powerful tools – now up to 55% off amid the Extended Cyber Monday offer!

While the ended lower for a fifth consecutive session on Wednesday, a tech-fuelled rally helped to push the to a fresh record high with a gain of 1.5%, while the also bounced back, erasing losses made in the previous two sessions.

were little changed in the early European trade after a mixed Asian session. Traders were looking forward to the European Central Bank’s rate decision and some second-tier US data, ahead of next week’s rate from the Federal Reserve and . After a strong performance throughout the year, there are still no major signs of the trend turning bearish for the S&P 500 heading into the final weeks of the 2024.

Before discussing the upcoming central bank rate decisions, let’s have a quick look at the technical aspect of the market to prepare for some trade ideas for today.

Technical analysis and trade ideas

The S&P continues to remain in a strong bullish trend and so far, we haven’t seen any major signs of weakness despite growing concerns about valuations, or the potential for interest rates to remain elevated next year under Trump’s presidency.

When markets are making higher highs and higher lows, there is no point in trying to fight it and it is always better to go with the flow until the charts tell us otherwise. Though we have had small corrections here and there, every single dip has been bought, with support coming in around logical technical levels.

Indeed, after this week’s earlier drop, all eyes were on the 6040-6053 area on the S&P futures chart, with the upper end of the range marking the November high. Once resistance, this area turned into support, leading to a nice bounce on Wednesday. This area now needs to continue holding as support to maintain the short-term bullish bias. However, if we go below it, then this could pave the way for a potential drop to test the support trend of the bullish channel or even the next major support zone between 5893 to 5927 (shaded in green on the chart).

Meanwhile, on the upside, the key level to watch is around 6092, which marks the 161.8% Fibonacci extension level from the last significant downswing that took place between July and August. Around such Fibonacci levels, you typically see some signs of profit-taking or a pause – something that has already happened in the last week and a bit. Therefore, a potential move to fresh all-time highs above last week’s peak of 6111 appears to be the most logical path from here.

Attention turns to central bank policy decisions

Attention is on the European Central Bank’s rate at 13:15 GMT (14:15 CET) after the Swiss Nation Bank earlier surprised with a 50 basis point rate cut instead of 25 expected, owing to below-forecast inflation in the nation.

As for as the ECB is concerned, economists widely expect a 25-basis-point rate cut, bringing the deposit rate down to 3.15% from 3.40%. While some speculated about a more aggressive 50-bps cut, a measured approach seems more likely, leaving the door open for further easing in 2025. That is something that President Christine Lagarde could signal today and potentially provide the next leg of the selling in the euro or buying in the major indices like the .

Next (LON:) week, we will hear from the US Federal Reserve, Bank of England and Bank of Japan among others. Ahead of these central bank meetings, there are not many super-important macro releases left until the new year. Today’s release of US and shouldn’t cause too much volatility, after CPI was in line on Wednesday at 2.7% year-over-year.

Wednesday’s US CPI data brought no unexpected increases, providing traders with the confirmation they needed to solidify expectations of a rate cut at the Federal Reserve’s final meeting of the year next week. According to the CME’s FedWatch tool, the likelihood of a 25-basis-point cut has now surged to over 96% following the release of the CPI figures. This leaves the Fed with little room to deviate without causing significant market disruption. In essence, a rate cut now appears inevitable, with no further major US data expected before next week’s FOMC meeting to sway their decision.

The main question is whether the central bank will pause rate cuts in early 2025 or continue with the current pace of 25 basis points per meeting. Should the Fed proceed with the anticipated 25-basis-point reduction next week, bringing the rate range down to 4.25–4.50%, the market assigns only a 22% chance of another cut at the next FOMC meeting on 29 January. Instead, rates traders seem to be leaning heavily – with a 72% probability – towards the next cut occurring at the Fed’s second meeting of 2025, scheduled for 19 March.

Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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