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S&P 500 Index Hits 5-Month Lows As 10Y Yield Soars Above 5%

The US stock market is facing strong headwinds due to the deteriorating macroeconomics and the rising geopolitical tensions. The S&P 500 index is having a deep pullback after making another lower high in October. This correction has given the bears a much needed momentum.

The E-mini S&P 500 futures tumbled on Monday. The futures of the benchmark index slid 0.5% during their London session. This also marked the fresh monthly lows for the futures contracts. The most concerning thing for the bulls is that the current downside push is supported by strong volume.

The S&P 500 index closed last week below the 200 daily moving average which was a sign of weakness. The downtrend can be attributed to an across the board bloodbath in the equities in the last two weeks.

Major companies from different sectors are set to report their earnings this week. These earnings along with the upcoming FOMC meeting will set the tone for the rest of the year. The CME’s Fed Watch Tool is predicting a 98.4% chance of the rates to remain at their current level.

Other major indices like Dow Jones and NASDAQ 100 are also facing strong headwinds but still stand a few points above their monthly lows. The earnings reports of the magnificent seven stocks are weighing on the benchmark indices.

S&P 500 index technical analysis
SPX Chart

S&P 500 Index Forecast

As mentioned earlier, the weekly closure below the 200-day moving average has given the bears an upper hand. This may give them enough confidence to target the demand zone which lies below 4,100 points in the coming weeks.

The S&P 500 index forecast has flipped bearish for me since it broke its 4,330 support in September. After a fakeout in October the index has once again plunged below this key level. If bears gain acceptance below the 4,200 level, the ongoing pullback may turn into a much deeper correction.