S&P 500 shows bearish dynamics

LAST Thursday (Oct. 31), the S&P 500 opened lower at 5,775.34 and continued its downward trajectory throughout the day, hitting an intraday low of 5,702.86. By market close, the index fell 108.22 points, or 1.86 percent, to close at 5,705.44, marking another day in the red.

Before the market opened, the core US Personal Consumer Expenditures (PCE) price index for September showed a 2.7% year-on-year increase. This figure slightly exceeded the forecast of 2.6 percent and was in line with the previous value of 2.7 percent. Better-than-expected inflation data weighed on market sentiment, pushing the S&P index lower at the open.

Microsoft shares fell nearly 6.05 percent even as the tech giant reported stronger-than-expected first-quarter results. Likewise, Meta shares fell 4.09 percent even after reporting better-than-expected third-quarter results.

The S&P 500 is currently trading about 2.95 percent below its recent peak of 5,878.46 on Oct. 17, 2024. A critical resistance level remains near 5850, an area that the index has struggled to surpass in recent sessions. The 100% Fibonacci level is closely aligned with this area, creating a key resistance barrier whose breakout could signal a move toward renewed bullish momentum, although recent economic data provides a challenging backdrop.

If the index continues to decline, the first and nearest support level is expected around the 50-day exponential moving average (EMA) at around 5700, which is the 78.6% Fibonacci retracement level, indicating a strong support area. Further declines could see the index test the 100-day EMA around 5580, where stronger support is expected to stabilize any deeper correction.

The Relative Strength Index currently stands at 41.68, indicating neutral to slightly bearish. If the RSI approaches oversold territory, it could present a buying opportunity for long-term investors looking to enter the market at lower levels.

The author of this article is an equity specialist at PhillipCapital.