S&P 500 (SPY) Tests Support At 3850

Key Insights

• S&P 500 is moving lower as Treasury yields are testing new highs. 
• Traders remain nervous ahead of the Fed Interest Rate Decision. 
• A move below the support at 3850 will push S&P 500 towards the next support level at 3825.

Ford Retreats As Traders Fear That Guidance Will Be Cut

S&P 500 declined towards the 3850 level as traders sold stocks ahead of the Fed Interest Rate Decision, which will be released tomorrow.

Ford declined by more than 10% in today’s trading session after the company revealed that it faced parts shortages. According to Ford, the company “expects to have about 40,000 to 45,000 vehicles in inventory at end of third quarter lacking certain parts presently in short supply”. Ford reaffirmed its full-year adjusted EBIT guidance of $11.5 billion – $12.5 billion. However, the market is worried that the company will be forced to cut its guidance in the upcoming months.

Gold stocks have found themselves under material pressure as gold markets moved closer to yearly lows. One of the leading gold stocks, Newmont Corporation, declined by more than 4% in today’s trading.

Energy stocks are also moving lower as WTI oil managed to get below the $84 level. Exxon Mobil, Chevron, and Schlumberger are down by more than 1%.

Leading tech stocks are mostly moving lower. However, Apple and Tesla are up by more than 1%.

From a big picture point of view, the current pullback is broad, and all market segments are under pressure. Traders reduce their risks ahead of the Fed Interest Rate Decision as they are worried that a 75 bps rate hike may be accompanied by hawkish commentary from Fed Chair Jerome Powell. Bond traders also fear that Powell will be hawkish, so Treasury yields test new highs.

Another Test Of The Key Support At 3850

S&P 500 continues its attempts to settle below the strong support level at 3850. If S&P 500 settles below this level, it will move towards the next support at 3825. A move below the support at 3825 will push S&P 500 towards the support at 3800. In case S&P 500 declines below 3800, it will head towards the next support level, which is located at 3780.

On the upside, S&P 500 needs to settle above the resistance at 3885 to have a chance to gain upside momentum in the near term. The next resistance level is located at 3900. A successful test of this level will open the way to the test of the next resistance at 3920.

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