Chart: The S&P 500 is testing resistance on the upside

US stock indices have set one record after another these days!

But is it time for a major S&P 500 pullback anytime soon?

Check out these inflection points I’m tracking in the 4-hour time frame:

S&P 500 Index (SPX500) 4 Hour Chart from TradingView

It looks like the Fed’s easing efforts and China’s aggressive stimulus measures are coming back to US stock markets lately!

In fact, the S&P 500 climbed to new records this week as FOMC officials continue to express support for further cuts in borrowing costs. After all, the possibility of even lower interest rates down the line could bring more profit to business and consumer activities.

Can this stock index sustain its rise beyond this short-term ceiling during the launch US PCE core price indexhowever?

Remember that directional biases and market price volatility conditions are usually driven by fundamentals. Let’s say you haven’t done your homework on the US stock market and general risk sentiment yet, then it’s time to check the economic calendar and keep up with the daily fundamental news!

The S&P 500 made higher lows and slightly higher highs, creating a rising wedge pattern that has held since August. The index is now hovering at wedge resistance, still deciding whether to make a bounce or break.

The 100 SMA is above the 200 SMA, suggesting that the path of least resistance is up, possibly taking the index higher by the same height as the chart formation. If the top of the wedge holds as a ceiling, on the other hand, the S&P 500 could pull back into nearby support areas marked by the Fib retracement tool.

Notably, the 38.2% level aligns with S1 ($5,629.22) and a former near-term resistance area, while the 50% Fib is close to the major psychological support at $5,600 and the dynamic inflection point of 200 SMA. The 61.8% Fib coincides with S2 ($5,554.68) and the bottom of the wedge.

Better keep your eyes open for reversal candlesticks that suggest a bounce around these levels if you are waiting for a chance to go up.

Regardless of how you decide to play this setup, be sure to practice proper risk management and check out our forex correlation tool!