S&P 500 Talking Points:

US equities opened the month with a bang that’s since turned into a whimper. But is a bigger move or theme afoot?

The feel-good days of Q1 and Q2 have come into question during Q3, marked by an increase of tension on the trade war front to go along with some persistent questions around the Federal Reserve.

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A semblance of fear continues to permeate the risk trade across global markets, and with uncertainty remaining around US-China relations on top of FOMC policy, the S&P 500 has built into a range after the early-August sell-off.

Taking a step back on the chart and the fear is that the S&P 500 continues to hold support from a trend-line produced by December and early-August swing-lows. Resistance, on the other hand, comes from a less-aggressively-sloped trend-line sitting atop price action, making for a rising wedge formation.

S&P 500 Daily Price Chart

Chart prepared by James Stanley; SPX500 on Tradingview

The early-August sell-off showed with force in the S&P, but the manner in which it happened appeared to be a bit messy. This sell-off took place on the heels of the Fed’s first rate cut in a decade but, it was the announcement of additional tariffs on China that showed up a day later that appeared to have the greatest pull.

Since then, President Trump has announced a delay on tariffs and this has helped support to re-appear in the S&P 500. Price action has yet to re-test those prior highs, however, as a range has built on short-term charts. Back-and-forth price action has been the tone for the past three weeks with support showing around the 23.6% retracement of the August sell-off while resistance has shown around the 61.8% marker.

S&P 500 Four-Hour Price Chart

Chart prepared by James Stanley; SPX500 on Tradingview

S&P 500 Strategy Near-Term

While bearish prognostications may seem logical from here, it’s important to note that the bullish trend in stocks has yet to die down. There could certainly be bearish potential should sellers show a more concerted effort, but this is likely going to need an assist on the fundamental front from some type of surprise.

For bearish strategies, traders can follow breaks below the 2809 to open the door for aggressive strategies, plotting a break of the Monday low to re-open the door for a re-test of the 2773 swing-low that held the August sell-off. For a slightly more conservative approach, traders can wait for a breach of that latter price to indicate that bears are gaining greater pull in the S&P.

Until then, bullish strategies can remain while approaching the recent range, looking to aggressively work with tests of support in the 2809-2832 area while being a bit less aggressive upon re-tests of resistance.

S&P 500 Four-Hour Price Chart

Chart prepared by James Stanley; SPX500 on Tradingview

To read more:

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--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX