S&P 500 Retreats In Low Volume Session

Key Insights

• Energy stocks decline amid a huge sell-off in natural gas markets. 
• Tax-loss selling may have put additional pressure on stocks in today’s trading session. 
• A move below 3800 will push S&P 500 towards the support level at 3775.

S&P 500 Remains Under Pressure

S&P 500 is down by 0.7%, driven by weak performance of energy stocks. The tech-heavy NASDAQ Composite declined by 0.9%.

Energy stocks are leading the pullback amid a sell-off in natural gas markets, which was triggered by warm weather. WTI oil has also found itself under strong pressure today as Russia’s response to the oil price cap was weaker than expected. EQT Corporation, APA Corporation, and Coterra Energy are among the biggest losers in the S&P 500 today.

Tech stocks also remain under pressure. Apple gained strong downside momentum and moved below the $127 level. Apple stock is down by roughly 30% year-to-date.

Today is the last day to sell stocks for tax-loss harvesting, which may have served as a material negative catalyst for S&P 500. Trades take time to settle, so the last day for tax-loss selling is not December 31.

From a big picture point of view, the market needs additional positive catalysts to change the current trend. The hawkish Fed and recession fears have put material pressure on stocks in recent days. It will be interesting to see whether S&P 500 manages to gain upside momentum at the start of 2023 as investors usually initiate new positions at the beginning of the year.

S&P 500 Tests Support At 3800

S&P 500 managed to get below the support at 3815 and is testing the next support level at 3800. In case this test is successful, S&P 500 will move towards the support at 3775. A successful test of the support at 3775 will open the way to the test of the support level at 3750. If S&P 500 declines below this level, it will head towards the support at 3725.

On the upside, the previous support at 3815 will serve as the first resistance level for S&P 500. In case S&P 500 gets above this level, it will move towards the resistance level at 3840. A move above the 3840 level will open the way to the test of the resistance at 3860.

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