On the 1-hour chart, the S&P 500 is developing a reversal pattern.
Will this result in the short-term rise coming to an end?
The stock index has been on an upward trend since mid-March, when worries about the global financial system began to subside, as seen on the 1-hour chart.
The banking crisis fuelled rumors that the Fed would halt tightening and possibly even lower interest rates in less than a year, which also helped.
But that happened a month ago.
Since then, Uncle Sam has published bulletins on weak leading indicators that indicate a recession. Yipes!
Technically speaking, the S&P 500 failed to set any new April highs at the same time that it is still hovering near a multi-month resistance zone.
On the 1-hour chart, the decline from yesterday's levels of 4,120 actually created a probable Double Top pattern.
Are we witnessing the beginning of a turnabout? Or are bulls and bears simply taking a break before making an effort to reach new highs?
Traders will be looking for hints in upcoming data releases including today's U.S. CPI report, the FOMC meeting minutes, and the post-crisis profit reports from the major banks to gain a clearer understanding of the Fed's policy plans.
The SPX might reach fresh April highs and could even reach its February highs above 4,200 if attention is paid to falling inflation, stronger-than-expected earnings, and general risk appetite.
However, U.S. stock prices might experience persistent selling if this week's headlines indicate that the country will experience further tightening (and a bigger recession).
For proof of a persistent bearish downswing, watch for a break below the "neckline" of the Double Top, the support of the trend line, or the 100 SMA!
