US 500 – Major Momentum Stall or Just Taking a Breather?
After posting a gain of around 23%, 2024 was undoubtably another strong performance for the US 500 index. However, hopes of that much discussed ‘Santa Rally’ failed to materialise. Undermined by hawkish comments from Federal Reserve (Fed) Chairman Jerome Powell on December 18th at the press conference following another 25bps (0.25%) interest rate cut.
His suggestion that further Fed interest rate cuts are likely to be on hold until more progress is made on bringing inflation back to the US central bank’s 2% target, put a dent in the strong bullish sentiment that had seen the US 500 index touch a new all time high at 6101, only days earlier on December 6th.
Now, with the index back trading around 5900 again, the question for traders at the start of 2025 may be, is this a major momentum stall or is the uptrend just taking a breather?
Weekly Mid-Average a Potential Line in the Sand
Recent declines in the US 500 are now approaching a possible key support level within the weekly picture marked by the rising Bollinger mid-average, currently at 5824 (Blue line on chart).
While having seen this line hold and resume price strength on previous occasions is no guarantee it will do so again, it may well be something of a ‘line in the sand’ to watch if tested in upcoming trading sessions.
Price action against this support zone could help us to gauge if the latest weakness in price is just a limited reaction to over-extended upside conditions, or if a downside closing break below this level is seen, if further extended falls may be about to materialise.
As we can see from the chart above, in April, August and September last year, it was the rising mid-average (Blue line on chart) that helped hold price declines and even prompt fresh upside strength to breach previous highs and extend the pattern of higher highs and higher lows.
US 500 - Why We Should Monitor Weekly Close Against 5824 Level
Sometimes, when a closing break below the weekly mid-average develops, we must wait to see if the average turns down, to suggest the potential of a downtrend forming, or as was the case in September, upside price action resumes, to break back and close above the still rising mid-average, pointing to the potential for further price strength.
So, with this in mind, if tested in upcoming sessions, it may be the Bollinger mid-average that can be important again as we move into 2025, and we will be monitoring the 5824 level on a closing basis.
Closes below this support, if followed by the average turning lower, could prove to be a sign of a more extended phase of weakness, although while it holds, the positive upside trending condition could still remain.
Potential Resistance Levels to Watch
While the rising weekly Bollinger mid-average currently suggests the longer term trend is still up, looking at the same measure on the daily chart, offers a slightly different picture.
The negative reaction to the Fed rate announcement on December 18th, saw the US 500 index break and close below its daily Bollinger mid-average, and as the daily chart above shows, this average has now turned lower.
While the daily mid-average (Blue line on chart), currently at 5998, continues to fall and as it did over the Christmas period, resists fresh attempts to move back higher again, this opens up the possibility that a short term daily downtrend may be materialising.
Potential Pivot Points:
In conclusion, it could be the weekly Bollinger mid-average at 5824 that marks a possible support, while the declining daily Bollinger mid-average at 5998 may suggest a potential important resistance level.
It could be worth watching both identified levels on a closing basis at the start of 2025. Confirmed closing breaks of either side, followed by the mid-average changing direction (the weekly average lower, or the daily higher) may lead to a more prolonged phase of price movement, in the direction of the break.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
His suggestion that further Fed interest rate cuts are likely to be on hold until more progress is made on bringing inflation back to the US central bank’s 2% target, put a dent in the strong bullish sentiment that had seen the US 500 index touch a new all time high at 6101, only days earlier on December 6th.
Now, with the index back trading around 5900 again, the question for traders at the start of 2025 may be, is this a major momentum stall or is the uptrend just taking a breather?
Weekly Mid-Average a Potential Line in the Sand
Recent declines in the US 500 are now approaching a possible key support level within the weekly picture marked by the rising Bollinger mid-average, currently at 5824 (Blue line on chart).
While having seen this line hold and resume price strength on previous occasions is no guarantee it will do so again, it may well be something of a ‘line in the sand’ to watch if tested in upcoming trading sessions.
Price action against this support zone could help us to gauge if the latest weakness in price is just a limited reaction to over-extended upside conditions, or if a downside closing break below this level is seen, if further extended falls may be about to materialise.
As we can see from the chart above, in April, August and September last year, it was the rising mid-average (Blue line on chart) that helped hold price declines and even prompt fresh upside strength to breach previous highs and extend the pattern of higher highs and higher lows.
US 500 - Why We Should Monitor Weekly Close Against 5824 Level
Sometimes, when a closing break below the weekly mid-average develops, we must wait to see if the average turns down, to suggest the potential of a downtrend forming, or as was the case in September, upside price action resumes, to break back and close above the still rising mid-average, pointing to the potential for further price strength.
So, with this in mind, if tested in upcoming sessions, it may be the Bollinger mid-average that can be important again as we move into 2025, and we will be monitoring the 5824 level on a closing basis.
Closes below this support, if followed by the average turning lower, could prove to be a sign of a more extended phase of weakness, although while it holds, the positive upside trending condition could still remain.
Potential Resistance Levels to Watch
While the rising weekly Bollinger mid-average currently suggests the longer term trend is still up, looking at the same measure on the daily chart, offers a slightly different picture.
The negative reaction to the Fed rate announcement on December 18th, saw the US 500 index break and close below its daily Bollinger mid-average, and as the daily chart above shows, this average has now turned lower.
While the daily mid-average (Blue line on chart), currently at 5998, continues to fall and as it did over the Christmas period, resists fresh attempts to move back higher again, this opens up the possibility that a short term daily downtrend may be materialising.
Potential Pivot Points:
In conclusion, it could be the weekly Bollinger mid-average at 5824 that marks a possible support, while the declining daily Bollinger mid-average at 5998 may suggest a potential important resistance level.
It could be worth watching both identified levels on a closing basis at the start of 2025. Confirmed closing breaks of either side, followed by the mid-average changing direction (the weekly average lower, or the daily higher) may lead to a more prolonged phase of price movement, in the direction of the break.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
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