The S&P 500 (ES) increased over 1.5% on Friday, finishing the week above the 38.2% Fibonacci retracement level from February to April. The recent bounce in ES and the Nasdaq 100 suggests potential movement towards the 50% retracement level of the bear slide from February.
The break above Bear Flag consolidation resistance on the 4-hour chart may lead to a false breakout, with exhaustion likely at the 61.8% Fibonacci level. While ES rebounded off the 23.6% level, the overall trend indicates that the Bull Market extension from October 2022 may be concluded, as the monthly MACD is nearing a negative cross.
Volatility Could Increase Mid-Week
Looking ahead, volatility could increase mid-week due to US retail sales data, comments from Powell, and unemployment claims on Thursday. Most indicators, including the weekly, daily, and 4-hour RSI, show a potential for a rally, despite the downward trend in the weekly MACD.
The S&P 500 futures contract, having closed the week with a move exceeding 1.5%, has reclaimed footing above the 38.2% Fibonacci retracement level measured from the February to April decline. This marker typically implies partial recovery of prior losses, and reaching it hints at growing buying interest among market participants. Interestingly, the Nasdaq 100 futures have mirrored this enthusiasm, lifting expectations that the next target could easily become the 50% retracement level. Such a retracement would imply that half of the move lower has been undone, a fairly common rebound zone in technical terms.
However, a glance at the 4-hour chart reveals a pattern that warrants further scrutiny. The recent push higher breached resistance stemming from a Bear Flag setup. These formations generally occur in downward trends and can produce brief counter-trend rallies that fail to sustain. Though the break suggests bullish intent, momentum appears limited. Should buyers lose conviction before breaching the 61.8% Fibonacci level, which sits higher up, this would point to a short-lived move, fuelling the idea of a false breakout followed by renewed weakness.
Importantly, the market pulled back from the 23.6% Fibonacci zone earlier in the move, which had acted as an effective springboard. But when placed against broader context, the rebound seems more reactive than foundational. If we zoom out, the monthly MACD histogram is quietly rolling over and is close to crossing into negative territory. This development, if confirmed, would support the idea that the multi-month rally stretching from October 2022 may be nearing its end. Momentum at such compressed timeframes tends not to reverse without sustained pressure, and here we see fatigue possibly setting in at a higher macro level.
Key Events And Technical Indicators
Midweek brings events that could well rattle near-term expectations. First, retail sales figures from the United States are set for release, which typically offer insight into consumer demand and spending resilience. What’s especially useful for us here is not just how the figures compare with estimates, but whether traders begin to adjust their interest rate expectations in response. Following that, commentary from the central bank chair could touch on monetary policy guidance, and then by Thursday, the latest jobless claim numbers arrive. Any of these could reshape volatility profiles.
From a technical lens, strength is still apparent on certain timeframes. RSIs across the four-hour, daily, and even weekly intervals remain elevated or bouncing. That said, the weekly MACD is still declining, which often produces headwinds for sustained upward moves. The mixed message suggests that, while day-to-day fluctuations might favour rallies, the broader pressure leans downward.
We should continue to focus on the reaction to key resistance levels above, particularly the 50% retracement zone, and how the volume and volatility behave approaching those thresholds. Encouraging price action into those levels with decreasing momentum or participation would contradict a sustained recovery. Meanwhile, any renewed selling pressure around Wednesday or Thursday, especially after a muted response to economic data, could give the lower bound of recent ranges fresh relevance again.
For now, caution seems warranted near overhead Fibonacci zones. With wider indicators diverging, appetite for risk may continue to fluctuate, especially in shorter-tenor positioning.
