Fears about inflation due to expectations of a faster recovery of the global economy have caused a fall in global stock markets and a move towards commodities and spot metals.
The S&P 500 index is sharply lower, trading at 3883.1 or 0.6% off the pace despite strong gains in the shares listed under the Energy Index. The Financial stocks also gained on the day, but the other 9 indices on the S&P 500 were lower.
Gold is considered a hedge against inflation and this is driving prices on the XAU/USD higher at the expense of stocks. This has allowed the bears on the S&P 500 to drive down shares to two-week lows.
Technical Levels to Watch
Today’s candle has formed a doji with a downside gap, located at the 3870.0 support level. If the candle ends this way and we have a follow-up long bullish candle, then we could have a morning doji star pattern, which is rare. This scenario would allow bulls to aim for the 3950.4 resistance, where the all-time high resides. Further price advance could then have a chance to target the 4005.9 level (161.8% Fibonacci extension).
On the flip side, a decline that takes out 3879.0 brings in 3823.9 as the next downside target, with 3765.1 and 3721.2 serving as additional targets to the south.
S&P 500 Index; Daily Chart