S&P 500 Falls Below 3950 As Sell-Off Continues

Key Insights

• Stocks remain under strong pressure as traders cut risks ahead of Fed’s meeting. 
• The sell-off in commodity markets put additional pressure on stocks today. 
• A successful test of the support at 3940 will push S&P 500 towards the next support level at 3915.

S&P 500 Retreats As Risk Appetite Declines

S&P 500 remains under strong pressure amid worries about recession and Fed’s policy. Interestingly, Treasury yields are moving lower, but lower yields do not provide any support to the stock market.

The major sell-off in the oil markets, which pushed WTI oil below the $75 level, has clearly hurt stock market sentiment. Not surprisingly, energy stocks led the sell-off in the S&P 500. EOG Resources, APA Corporation, and Marathon Oil were among the biggest losers in the energy segment today.

Meta was down by 6% as reports indicated that the EU was going to put more pressure on the company’s targeted ads. Other big cap stocks like Apple, Microsoft, Amazon, and Tesla were down by more than 2% in today’s trading session.

From a big picture point of view, S&P 500 continues to pull back after the strong rally. This pullback looks natural ahead of the Fed’s last meeting of the year, which will take place next week. The sell-off in commodity markets looks bearish for stocks, but traders should note that Treasury yields are moving lower, so bond traders are less worried about an aggressive Fed.

S&P 500 Tests Support At 3940

S&P 500 is currently trying to settle below the support level at 3940. RSI remains in the moderate territory, so there is plenty of room to gain downside momentum in case the right catalysts emerge. If S&P 500 manages to settle below 3940, it will head towards the next support level, which is located near the 50 EMA at 3915. A move below the 50 EMA will open the way to the test of the support at 3890. In case S&P 500 declines below this level, it will head towards the support at 3860.

On the upside, S&P 500 needs to get back above 3940 to have a chance to gain upside momentum in the near term. The next resistance level for S&P 500 is located at 3960. If S&P 500 climbs back above this level, it will move towards the resistance at the 20 EMA near 3975.

For a look at all of today’s economic events, check out our economic calendar.