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SPX Trading Range

Investors continue to focus on the direction of the inflation rate and the extent of the Fed's hawkish interest-rate hikes as the central bank attempts to contain prices. The ability of the Fed to engineer a soft or hard landing has hurt financial assets such as SPX, as the benchmark index has fallen 16.25% during 2022.


Last week the SPX recorded the best two-day gains since the 2020 pandemic after an economic figure (CPI) showed inflation beginning to ease in October.


Today, stocks continue with their oversold rally after another key economic number (Producer Price Index) showed slowing increases in supplier prices. PPI rose 8% in October over a 12-month basis and is down from 8.4% in September and much lower than 11.7% in March.


The better PPI economic number offers further evidence inflationary pressures may be subsiding. Dovish comments from senior Fed officials such as Fed Vice Chair Brainard also boosted stocks as expectations are increasing that the central bank may moderate rate hikes.


S&P 500 Index (SPX) gained 34.48 points or 0.87%. The Dow Jones Industrial Average (INDU) rose 56.22 points or 0.17%. The Nasdaq Composite Index (COMPQ) soared 162.19 points or 1.4%, as Tech related stocks continued with their recent recovery.


Most of the 11 SPX sectors advanced. Leaders included the Communications Services sector (XLC +1.49%), Consumer Discretionary (XLY+1.37%), Real Estate (XLRE +1.25%), and Technology (XLK +1.21%). Laggards included Materials (XLB -0.15%) and Healthcare (XLV – 0.13%).

Although the inflation and Fed narrative may have shifted and seasonality factors favor stocks into the end of the year, the mid-Oct 2022 rally can pause after the 537.26-points rally or 15.30% gains as SPX nears pivotal resistance.

SPX remains in a well-established Jan 2022 primary downtrend channel between 3,295-3,421 and 4,123-4,184. The downtrend will persist into the end of the year and early next year.


Until SPX breakout above the downtrend channel or a breakdown below the bottom of the downtrend, the dominant and prevailing trend remains.

Inflation, interest rates, recession concerns, geopolitical uncertainties, Fed monetary policies, and others can lead to further market volatility over the near term.

Also, technical indicators such as the SPX advance-decline market breadth, MACD, and RSI remain neutral.

However, on a near-term trading basis, a trading range is likely between 3,500-3,700 and 4,100-4,300.

Pivotal support coincides with the Dec 2021, Jan, Feb, Mar, Jun, Jul, Sept, and Oct 2022 lows and the Nov 2020 breakout.

Formidable resistance converges near the top of the Jan 2022 downtrend channel, 200-day ma, 50-61.8% retracement from Jan-Oct 2022 decline, 9/12/22 island reversal high, 8/26/22 negative outside day high, 8/22/22 gap-down, 8/22/22 gap-down, and 8/16/22 reaction high.


Source: Chart courtesy of StockCharts.com

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Technical Summary Equities – SPX nears pivotal intermediate-term resistance at 4,105-4,219 or the top of the Jan/Mar 2022 downtrends, Jun, and Sept 2022 highs, the 50% retracement from the Jan-Oct 202