US 500 – Facing a Potential Sentiment CrossroadsUS 500 IndexPEPPERSTONE:US500PepperstoneWell, the first US non-farm payrolls release of 2026 is now in the rear view mirror and while it led to the slim hopes of a fourth Federal Reserve interest rate cut in a row being priced out of contention by markets when policymakers meet again on January 27th-28th to decide on monetary policy, it did keep trader expectations for Fed rate cuts later in the year alive and also added weight to the story of a resilient US economy. On Friday, this helped the US 500 post a record close at 6963 after registering a weekly gain of 1.5%, which puts the index back within touching distance of the psychological 7000 barrier again for the fourth or fifth time since late October. Looking forward, this week commences with US 500 traders having to weigh the impact to risk sentiment of news released this morning that the Federal Reserve Chairman Jerome Powell has been threatened with a criminal indictment over comments he made to Congress regarding a building renovation project (Reuters), in what could be the next attempt by the Trump administration to challenge the independence of the US central bank. They may also need to assess the potential impact of fast moving geo-political events in Iran, which have drawn comments from President Trump regarding US involvement to protect protestors in the country, the start of US Q4 earnings season and the next inflation readings, all of which could influence where the index moves next. The major US banks kick off Q4 earnings season with Bony Mellon and JP Morgan reporting on Tuesday (before open), Bank of America, Wells Fargo and Citigroup on Wednesday (before open) and then Goldman Sachs and Morgan Stanley due Thursday (before open). While investment banking income is expected to have boosted profits in the quarter, traders may also be focused on the size of bad debt provisions for businesses and consumers, alongside any insights into future revenue and the health of the economy. In terms of inflation, any CPI (Tuesday 1330 GMT) or PPI (Wednesday 1330 GMT) reading above expectations, could have a negative impact on the US 500 as traders start to worry that Trump’s tariffs are finally starting to have an upward effect on prices, the very situation that Fed policymakers have flagged as one of their concerns moving through 2026. However, inline or below expectation releases could embolden traders to push the US 500 through 7000 to even higher highs. With the potential for an increase in volatility ahead, below is the latest update on the technical trends and key charts levels that may be useful to monitor over the coming 5 trading days. Technical Update: Is Upside Momentum Emerging Again? Momentum, or the speed at which price moves, can often be difficult to measure with precision. Technical indicators help, but they don’t always give consistent signals. In practice, it often comes down to observing the price action itself to determine how quickly the market is moving in either direction, whether that pace can continue, and then assess if corrections or recoveries may be starting to interrupt the move and slow activity down. Looking at the chart above, it’s evident that the US 500 index showed good upside momentum between the August 1st low and the October 30th high. Prices moved higher in a steady, sustained way, posting new all‑time highs. Any pullbacks during this period were brief and quickly met with fresh buying interest, helping to maintain the overall positive trend. Since the October 30th high, the picture has changed somewhat. Price weakness has become more prolonged, and periods of strength have repeatedly failed to break prior highs or extend the uptrend. This is a classic example of slowing upside momentum, leading to a broader phase of consolidation in price. Where does this leave the US 500 index now? Well, last Friday delivered fresh all‑time highs at 6976, and that naturally raises the question: Is this the start of positive momentum returning to the US equity market, or simply another brief phase of strength before a further pullback develops? Of course, we can’t know the answer with certainty, but by tracking the key support and resistance levels, we may be able to judge whether upside momentum is returning and where the next directional themes for the US 500 index could begin to develop from. Potential Resistance Levels: As noted earlier, strong upside momentum is characterised by shallow corrections and repeated bursts of buying that see prices move to new highs. In that context, Friday’s new all‑time high at 6976 could be viewed by some as an initial sign that momentum is trying to rebuild. However, the index will need to continue posting new highs in the days ahead to confirm the potential for a further phase of price strength. If the index can achieve a closing break above the recent high at 6976, it could be an indication that positive momentum is starting to rebuild again. Should this occur, attention may then turn toward 7082, which is the 38.2% Fibonacci extension of the October/November correction, as next possible resistance to price strength. A close above 7082 could then strengthen the case for further gains toward 7180, which is the higher 61.8% extension level. Potential Support Levels: Of course, it’s also possible that the latest phase of strength proves unsustainable as has been the case since the October 30th high. If the index struggles to post further all‑time highs and weakness begins to develop again this week, attention may then shift back to the downside. A break below key support levels could increase the risk of another decline. The first potential area to watch could be 6878, which is the 38.2% Fibonacci retracement of the latest price strength. As the chart above highlights, a break below 6878 may suggest a further loss of upside momentum and the risk of a price setback. If that occurs, attention could shift toward 6815, the 61.8% retracement level, as a possible support, even 6716 which is the low from December 18th. The material provided here has not been prepared accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. 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