Takeaways
- The S&P 500 plunged on Friday and has lost ground in five of the past six weeks amid concerns about the impact of tariffs and the outlook for the economy.
- The index broke down below a flag pattern in Friday's trading session, potentially paving the way for a continuation move lower.
- Investors should monitor crucial support levels on the S&P 500's chart around 5,445 and 5,260, while also watching key resistance levels near 5,875 and 6,090.
The S&P 500 (SPX) lost ground last week amid uncertainty about the impact of tariffs and growing concerns the economy could be headed toward a recession.
The index, which lost ground in five out of the last six week, could see increased volatility this coming week as new tariffs will be expected on Wednesday. This is a day that President Trump has referred too as “Liberation Day.”
The S&P 500 trades 9% below its record high set last month as the Trump administration’s on again, off again tariff policy has sparked concerns that inflation could reignite and economic growth could stall. The benchmark index dropped 2% on the Friday to close at $5581.
Below, we take a closer look at the S&P 500’s chart and apply technical analysis to identify crucial levels worth watching out.
Flag Pattern Breakdown
After falling below the closely watched 200-day moving average, the S&P 500 formed a flag in the second half of March before breaking down below the pattern in Friday’s trading session, potentially paving the way for a continuation move lower.
It’s also important to note that the relative-strength index failed during the recent index upswing to return above the threshold of 50, signaling an underlying weak purchasing momentum.
Let’s identify several crucial support and resistance levels on the S&P 500’s chart that that investors may be monitoring.
Monitor Support Levels for Critical Services
The index could drop further this week to around 5,445. This area could provide support near the lower ranges of a consolidation phase that formed on the graph in June last, which closely coincides with troughs from July and September.
The bulls’ failure to defend this technical level is setting the stage for possible drops to the 5,260 region. Investors in the index can look for buying opportunities near the March peak of last year, the May pullback low, and the early August swing low.
This area also lies in the same vicinity as the projected bars pattern target, which takes the index’s move lower in 2023 following a chart flag pattern and overlays it on the current flag patterns.
Key Resistance Levels to Watch
A recovery effort may see an initial upswing at around 5,875. The index finds resistance at this level near a downward sloping, 50-day MA as well as a trendline which connects a number of similar price points in the chart dating back to October’s peak.
Finally, a breakout above this area may see the S&P 500 climb to the 6,090 level. Market watchers are likely to pay attention to this area, as it may provide resistance near multiple peaks located just below the record high of the index set last month.
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