S&P 500 Analysis: Threat of an Important Support Breakdown is Growing

<img src="https://fxopen.com/blog/en/content/images/2023/10/spx500-1.jpg" alt="S&amp;P 500 Analysis: Threat of an Important Support Breakdown is Growing" /><p>On September 19, we <a href="https://fxopen.com/blog/en/oa-market-analysis-s-p-500-under-pressure-ahead-of-federal-reserve-meeting/">analysed</a> the S&amp;P 500 index, indicating that the market is under pressure. This was an important long term analysis, and let&apos;s see what has changed in a month with the news that happened yesterday.</p><p>A month ago we marked turning points A, B, C, D on the chart.</p><p>Since then, new turning points have appeared: E, F, G, H.</p><p>As we indicated, in the pulse sequence A→B, B→C, C→D, D→E, each subsequent pulse was 50% shorter than the previous one. The same observation is true for the E→F movement, which is the last in a series of contracting impulses. That is, the market either compressed into a spring or formed an important balance of supply and demand.</p><p>However, the F→G impulse violated this trend. This means that the market has left the state of balance in a bearish direction. At the same time, the channel expanded by 2 times (according to the principle of a parallel channel), and the market found new support G at its lower border. Further, it is important that the movement G→H amounted to 50% of the decline, which corresponds to a bullish corrective movement within the framework of the dominant downward trend (as you understand, the trend began when the market came out of balance).</p><figure><img src="https://fxopen.com/blog/en/content/images/2023/10/201–2-.png" alt="S&amp;P 500 Analysis: Threat of an Important Support Breakdown is Growing" loading="lazy" width="2000" height="1099" srcset="https://fxopen.com/blog/en/content/images/size/w600/2023/10/201–2-.png 600w, https://fxopen.com/blog/en/content/images/size/w1000/2023/10/201–2-.png 1000w, https://fxopen.com/blog/en/content/images/size/w1600/2023/10/201–2-.png 1600w, https://fxopen.com/blog/en/content/images/size/w2400/2023/10/201–2-.png 2400w" sizes="(min-width: 720px) 720px" /></figure><p>This assumes 2 basic scenarios:</p><ol><li>the S&amp;P 500 index will balance around the lower boundary, which will mean fluctuations in the area of 4,250-4,350;</li><li>the index price will develop a downward movement, breaking through important support, which, as we showed earlier, originates from the bottom of the panic associated with the spread of coronavirus in 2020.</li></ol><p>Considering that on Wednesday and Thursday the E-mini S&amp;P 500 futures declined with acceleration and increasing volume, the odds may be on the side of the second scenario.</p><p>This can be facilitated by:<br>→ fears that the United States may be drawn into the escalating military conflict in the Middle East. In a speech yesterday, President Biden said that support for Israel, like Ukraine, is important for the country&apos;s future;<br>→ the Fed policy with high rates. Inflation is still too high, Powell said in yesterday&apos;s speech;<br>→ disappointing company data during earnings season. An example is Tesla. We will soon find out how other large companies included in the index will report.</p>