The S&P 500 is currently under pressure, with the technical outlook confirming this trend. The Double Top pattern around 6921/6919 is a key indicator of further weakness, which began its decline on 12 December. There is an anticipation that the market will test 6683 as the initial target, with deeper support potentially at 6535. There is an expectation of initial buying at these levels and potential short-covering.

Short Position Opportunities

Current rallies are seen as opportunities to establish short positions. If the market does not surpass 6769, further declines might follow. Surpassing this level could lead the market to 6823/6826, which is expected to act as a resistance level.

Bearish Double Top Formation

The recent failure of the S&P 500 to break through the 6920 area confirms a bearish Double Top formation, indicating that further declines may occur. Traders might consider buying put options or establishing bearish credit spreads, anticipating a move towards the initial 6683 target. This technical pressure is occurring as the latest inflation data from November showed core Consumer Price Index (CPI) remaining stubbornly above the Federal Reserve’s target, which raises concerns that interest rates will remain higher for a longer period. The labor market has also cooled, with the latest Job Openings and Labor Turnover Survey (JOLTS) report indicating job openings have fallen to a two-year low, suggesting the economy is slowing. These factors support the view that any upcoming market strength will be short-lived. Any rally towards the 6769 level should be viewed as an opportunity to add to short positions or sell call options against existing holdings. The CBOE Volatility Index (VIX) has jumped over 25% this month, reflecting growing nervousness among investors, which often precedes further declines. If the market pushes past 6769, the 6823/6826 zone represents a stronger area to initiate shorts, as it is likely to act as a firm ceiling. Create your live VT Markets account and start trading now.

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