Many fund managers and market participants are still on holiday and will return during the week of January 6th.
As we start 2025 and progress into the first quarter, it’s essential to establish a technical baseline for the S&P 500 (SPY) before the markets resume their full activity.
Here are a few key technical occurrences for the S&P 500 (SPY) in December 2024 that are worth noting:
- December 18th: The price broke a longer-term upward diagonal support line with conviction.
- December 27th: The price experienced selling pressure after rebounding from recent strength near the former upward diagonal support line, which has now become a potential resistance area.
- January 2nd: The price closed at a potential key support level and a former area of horizontal “market memory,” closing around the former October highs and mid-November lows at approximately the 23.6% Fibonacci retracement level.
S&P 500 (SPY) – Daily Chart
We need to keep an eye on the former “market memory” horizontal area and the recent December lows around $580 in the near term to see if these areas hold.
A breakdown and close below these levels could lead to additional downside.
Additionally, we should monitor a few areas above that could potentially act as shorter-term resistance with any near-term upward strength:
- Around $590 – $595
- The round “psychological” $600 trading number – $602 level (Top of the Dec 18th red candle)
- All the way back up to the $609 – $610 area
From a macro and intermarket perspective, it’s also crucial to keep an eye on the rising US Dollar (DXY) and Interest Rates (10-year Treasury Note Yield – TNX).
Continued upward movements in both are likely to exert additional downward pressure on equities, particularly the S&P 500 (SPY).
US Dollar (DXY) – Daily Chart
10 Year Treasury Note Yield (TNX) – Daily Chart
We’re also noticing a slight uptick in market volatility, as indicated by the S&P 500 Volatility Index (VIX).
Although the reading remains relatively low (below 20), there’s been a gradual increase in underlying momentum building. This serves as a potential “heads-up” to keep an eye on.
Volatility S&P 500 Index – (VIX)
Finally, from a seasonality and historical return perspective, January tends to be a choppy month for the S&P 500.
This could be further compounded by a U.S. Presidential administration change and other potential ongoing geopolitical risks
Considering the current baseline snapshot of the S&P 500 technicals and the additional factors mentioned, it’s likely we’ll encounter continued near-term choppiness and probable volatility in January.
This might persist until major fund managers and market participants return to their trading desks during the week of January 6th and beyond, and until institutions further solidify their trading and investment plan objectives and start positioning for 2025.
Even though uncertainty reigns supreme right now, that doesn’t mean your trading plan should be uncertain too.
The best tool we have to handle market uncertainty is Market Rover – which throws uncertainty out the window for data-driven confidence!
Click HERE to get Market Rover and trade with certainty and confidence all year long!
Happy Trading!
