S&P 500 technical analysis ahead of the FOMC Minutes

The FOMC Meeting Minutes follow three weeks after the Federal Reserve of the United States announces the funds rate. It is a detailed report about what the FOMC members have discussed at their last meeting and often provides additional information than what the market has priced in the meantime.

Today’s release is particularly important. The Fed said it had started seeing a disinflationary environment, but the recent US inflation data was not so convincing.

As such, the US stock market tanked.

The S&P 500 index, for example, failed at 4,200, and now it trades below the pivotal 4,000 level. In addition, after this week’s holiday, investors reduced their exposure to equities awaiting the FOMC Meeting Minutes and the PCE Core inflation data to be released at the end of the trading week.

Is there still reasonable to have a bullish bias for the US stock market? Technical analysis says so.

S&P 500 remains bullish while above 3,800 points

While the recent selling is aggressive enough to scare many investors, the technical analysis perspective remains bullish while the market holds above 3,800 points.

More precisely, one can notice an inverse head and shoulders pattern with a neckline around the 4,200 area. This is the same level that provided support in March 2022, and now it provides resistance due to the change in polarity principle.

The measured move, calculated as the distance between the head and the neckline, is around 700 points. By projecting it to the upside from the neckline, we get a target of about 4,800 for the S&P 500 index.

The bullish scenario would be invalidated should the market drop below the lowest point in the right shoulder. If not, a daily close above 4,200 should trigger more upside for the S&P 500 index.