SPX - Relief until the FOMC meeting?

In tandem with what we predicted last week, the market experiences wild swings up and down. By yesterday's close, the SPX was up approximately 5.3% from its 2022 low. Then today, even prior to the U.S. market open, ES1! continuous futures are already pointing to another appreciation of at least 1%.

With that being said, we expect the market to continue showing signs of relief until the FED meeting between 1st and 2nd November 2022. Indeed, we think it is likely that the SPX will try to break above 3800 USD today; if it succeeds, then it will further bolster the bullish case in the short term. In such a case, we will pay close attention to other potential resistance levels at 3850 USD and 3900 USD.

Despite short-term bullishness, we remain bearish in the medium and long term. Furthermore, we expect the selling pressure to return to the market after the FOMC meeting. Our views are based mainly on macroeconomic factors. However, at the moment, we abstain from setting any price targets.

Illustration 1.01

The picture above shows the daily chart of SPX and two simple moving averages. Additionally, the red arrow shows declining volume for the past three sessions, reflecting a cool-off in the selling pressure. If the price holds above the 20-day SMA, it will be bullish for the short term.

Technical analysis - daily time frame
The RSI points to the upside; the same applies to the MACD and the Stochastic. DM+ and DM- are bearish. Overall, the daily time frame is slightly bullish.

Illustration 1.02

Illustration 1.02 shows the weekly chart of SPX. Two moving averages are still in the bearish constellation. We will monitor the price's ability to retrace toward the 20-week SMA and the 50-week SMA, which would represent a strong correction of the primary trend.

Technical analysis - weekly time frame
RSI, MACD, and Stochastic are neutral. DM+ and DM- are bearish. Overall, the weekly time frame is turning neutral.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

Trade active:

At the Friday close, SPX hovered around 7.6% from its low on 13th October 2022. Then on Monday, when the futures market opened, contracts soared more than 1% before giving up some gains in response to the happenings in the Chinese stock market overnight, where the Hang Seng index fell more than 6.3%, and the CSI 300 shed about 2.9% from its value.

This is a particularly bearish development as it confirms investors' fear regarding the economic slowdown in China. However, we expect the same reality to sink in also in the American and European markets. Because of that, we are very cautious as the FED meeting is approaching. With that being said, we would like to set a short-term price target for SPX at 3500 USD and a medium price target at 3300 USD.

Trade active:

Our price targets will become invalidated if the price holds above the invalidation line shown below.