Stocks finished lower on Tuesday, with the S&P 500 breaking the uptrend that had formed off the late-March lows. The next level of support for the index comes around the 10-day exponential moving average, which roughly aligns with the support level of 6,975—a level that had previously acted as resistance.
In the meantime, resistance at “C” in the megaphone pattern continues to hold. That’s notable, as a full resolution of the pattern would imply a move back to the lower boundary—potentially breaking below the recent March lows.
Given the market move—whether bullish or bearish—some degree of retracement would not be a surprise. Markets do not move in a straight line, and a pullback to the 38.2% or 61.8% levels would not be unusual. What is interesting here is how the 61.8% retracement level aligns with the gap from April 8 at 6,600.
Clearly, a breakout to the upside would be a significant positive catalyst, with the potential for the S&P 500 to move above 7,900. However, that outcome appears less likely than a pullback, given the current level of global uncertainty and trading near $100.
Additionally, Kevin Warsh had his confirmation hearing on Tuesday. While he spoke at length about , he also emphasized limited to no forward guidance, no , and a much smaller balance sheet. To me, that implies less liquidity and likely higher yields further out on the curve. How often has the Fed stepped in to support the market over the years? Now imagine a market left to work through things on its own. Right…
Rates did move higher on the day, likely driven more by oil than by Warsh. That said, rates are starting to take on a similar look to oil. The appears to be forming a bull flag, although resistance around 4.35% remains firm, and yields have not moved meaningfully in some time. The bigger concern comes just a few basis points higher, around 4.40%. A move through that level would likely mark a breakout from a multi-year consolidation phase and signal the start of a much larger move.
Clearly, oil would be the bigger driver of higher rates. Setting aside the news and focusing on the technicals, the charts suggest that Brent crude could move higher from current levels, assuming the intraday inverted head-and-shoulders and the larger falling wedge patterns continue to play out.
Meanwhile, is breaking down through its own bear flag on Tuesday. The only question that remains is whether it falls through support at 4,670.