The S&P500 is rallying after a massive new liquidity injection this week by many US banks, and a deposit backstop from the Fed, a form of QE light. As one would expect this is bullish for stocks.
Treasury Secretary Janet Yellen told the Senate Finance Committee that the US banking system remains sound and Americans can feel confident that their deposits will be there when needed.
Most of these banks are heavyweights inside the S&P500 index, thus with banking stocks rallying the index looks very bullish right now. A $30 billion liquidity injection into the system is no light matter.
With this in mind I think we are now going to see an attack upon the 4,000 resistance level making it extremely likely a breakout is going to take place above this key psychological level.
Something else to consider is market sentiment. The ActivTrader sentiment platform shows that only 38 percent of traders are bullish towards this market. I believe this is a positive sign because positive sentiment is not high as you would expect.
Usually, we should look to fade sentiment extremes, although this is not currently not present. We probably need to see bullish sentiment to take hold before looking to sell the S&P500 in order for the next major correction to happen.
S&P500 Short-Term Technical Analysis
The four-hour time frame shows that the S&P500 has broken higher, although a head and shoulders is present, it is also the case that a major double-bottom price pattern has formed.
upside risks are increased if we see a drop towards the 3,900 level. According to the size of the mentioned double bottom I would then expect a test of the 4,080 level in the short term.
S&P 500 Medium-Term Technical Analysis
Looking at the daily time chart, the central focus remains a massive falling expanding wedge pattern, as the price moves above the wedge, marking a good sign for the index.
The overall trend for the index is now bullish, placing the 4,000 and 4,200 areas as the main bullish targets for the US index.