To turn convincingly bullish, the SPDR S&P 500 ETF would need to break above US$440 using the 3% rule, which would mean heading for US$450. The SPX itself ended at 4,376 on Oct 11, so breaking above 4,400 does not look impossible. But, with volume contracting, it is more likely that the SPDR S&P 500 ETF heads towards US$422, where the 200-day moving average at US$421 is likely to prevent a further decline.
US markets shrugged off the hotter-than-expected PPI (producer price index) inflation data which market watchers attributed to the teeny-weeny dovish tinge in the meeting notes of September’s Federal Open Market Committee. As a case in point, the 10-year US treasury yield (UST10Y) is down to 4.57% from a high of more than 4.87% on an intra-day basis on Sept 30. The decline in US risk-free rates was sufficient to boost the US equities market.
However, based on the technical chart of the SPDR S&P 500 ETF, which mirrors the performance of the S&P 500 Index (SPX), the chart pattern looks like prices have broken below a minor double top, at the neckline of US$440 ($599). At present, US$440 is also the confluence of the 50- and 100-day moving averages. As such, the area around this level is likely to provide some resistance to the rebound. Interestingly, the chart shows heavy volume on the breakdown which occurred on Sept 25 versus the relatively light volume that accompanied the rebound. It is safe to assume that the resistance level is likely to stop the rebound move.
