The S&P 500 (SPX) has been under pressure, dropping from all-time highs as bearish divergences played out. However, reaching a major support level today raises the question: Is there room for a short-term relief rally, or is there more downside ahead?
Let’s break down the technical setup, key levels, and potential trade opportunities.
1. Trend & Price Action
✅ Long-Term Uptrend Intact: SPX remains inside its rising channel, meaning the broader bullish trend is still valid.
❌ Recent Breakdown: The index lost the 21 EMA (5,967) and 34 EMA (5,983), signaling a potential trend shift.
✅ Reaching Strong Support: Today’s recovery happened near the rising trendline and around the 5,700 level, which has acted as a demand area multiple times.
❌ Lower Highs Forming? If SPX fails to reclaim 5,875+, this could be a sign of trend exhaustion.
2. RSI Analysis (Relative Strength Index)
- Current RSI: 33.95 → Bearish, but nearing oversold levels.
- Bearish Divergence Played Out: Lower highs in RSI warned about this correction.
- Potential Bullish Reversal: A move above 46 could confirm momentum shifting back to bulls.
3. MACD Analysis (Moving Average Convergence Divergence)
- MACD Deep in Negative Territory: Strong bearish momentum.
- Bearish Divergence Confirmed: MACD made lower highs while price made higher highs, which led to the recent decline.
- Key Signal to Watch: If MACD histogram starts turning lighter red, it could indicate a slowdown in bearish pressure.
4. Key Support & Resistance Levels
✅ Resistance Levels (If SPX bounces higher):
- 5,770 (Previous Support, Now Resistance)
- 5,875 (Previous Support, Now Resistance)
- 5,945 – 5,970 (EMA Cluster & Key Resistance)
- 6,100 – 6,150 (All-Time High, Strong Resistance Zone)
Support Levels (If SPX falls further):
- 5,700 (Critical support)
- 5,650 (Previous tops)
- 5,400 – 5,500
5. Trade Setups
✅ Bullish Trade Setup (Buy the Dip Play)
- Entry: Buy if SPX holds above 5,700 and starts reclaiming 5,770.
- Target 1: 5,875 (Previous Support, Now Resistance).
- Target 2: 5,970 – 6,000 (EMA Confluence & Key Level).
- Stop-loss: Below 5,650.
Confirmation: RSI reclaiming 46+ and MACD showing weakening bearish momentum.
✅ Bearish Trade Setup (Short the Lower High)
- Entry: Short if SPX rejects 5,875 – 5,970 and fails to break higher.
- Target 1: 5,700.
- Target 2: 5,500.
- Stop-loss: Above 6,000.
Confirmation: RSI fails to break above 50 and MACD remains bearish.
Bearish Breakdown Trade Setup (If Support Fails)
- Entry: Short if SPX loses 5,700 and closes below it.
- Target 1: 5,500.
- Stop-loss: Back above 5,770.
Confirmation: Strong red candle closing below support with rising volume.
6. Conclusion & Bias
- Short-term neutral to bearish, but long-term trend remains intact as long as SPX holds the rising channel.
- 5,700 is the key level: If it holds, a relief rally towards 5,970 is likely. If it fails, expect a drop to 5,500.
- Best trade: Buy the dip at 5,700+ confirmation or short a rejection at 5,875 – 5,970.
Watch price action at resistance levels before deciding on the next move!
