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Analysis

Charts of the day – S&P 500 tests the pivot support

bears and bulls

The broader markets sell-off implies growing fears of a possible economic recession, which may induce further panic selling if the risk-off sentiment continues to prevail, but it is too early to say there will be a market crash as fundamentally nothing had been changed from yesterday’s Fed-induced relief rally.

Further wild swings will be expected in a highly uncertain time. From the technical perspective, a near-term bottom view is still in place, with major indices holding at their key technical support.

The CBOE 20-year Treasury Bond (VXTLT)/blue line, vs. S&P 500 /while line, vs. CBOE Volatility Index/rede line (Jan 2003-May 2022)

Source: Bloomberg (Click to see the enlarged chart) 

The above chart indicates an adverse correlation between the VXTLT and the S&P 500. The VXTLT tilts down from the peak of May, while S&P points up, which could indicate a near-term rebounding of the S&P 500, but we cannot confirm if this trend will persist.

S&P 500 – Daily (testing the pivot support that defines a further downtrend)

(Click to see the enlarged chart)

The S&P 500 moves in a range between 4,100 (low on 5 June) and 4,300 (the high since 25 April), where the index is testing on the key pivot support near a one-year low. A bearish breakout of this support could trigger a further sharp selloff towards the next support around 3,955 (the 78.60% retracement of Fibonacci connecting from the low on 4 Mar and the high on the 4 Jan).

Key technical elements:

  • In the last 8 trading days, the buy volume exceeds the sell volume, suggesting the bullish momentum may sustain.
  • Historical Volatility Index tilts down from above 70, suggesting volatility may fade (usually a rebounding in a downtrend).
  • However, both MACD and Stochastic returned downside moves, which indicates the selling pressure may persist. 


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