Throughout the night, indices continued to sell off, stemming from Federal Reserve (Fed) Chairman Jerome Powell’s comments. Economic data has continued to show that efforts to reduce inflation have not been effective. In anticipation of a said pivot, markets have been trending higher into the FOMC minutes. However, Powell’s remarks removed all notion of a pivot and sent the market tumbling.

Overnight selling continues after opening bell

When the opening bell sounded, major indexes moved lower. The S&P 500 futures (/ES) reached the psychological level of 3,700. This level has proven to be one of the last bastions of support for the markets, at least temporarily. 

After the short stint of selling, indices turned around and headed back higher. The buying pressure was strong enough to raise the market, but the volume and strength were not enough to make a significant move higher.

Market stalls near psychological level

At the high of the day, the psychological level of 3,750 slowed positive momentum in its tracks. For most of the day, the market consolidated around this level. 

During the last hour of the cash session, also known as power hour, the market flushed from the consolidation point at 3,750 and fell about 20 points.

Critical levels established today

Today, price action reaffirmed that two key levels remain valid and should be noted by traders. These levels are 3750 and 3700 on S&P 500 futures (/ES). The Simpler News article on Wednesday stated, “Toward the end of the week, the 21-day exponential moving average (EMA) at 3,800 on the S&P 500 futures is going to be a crucial level on the chart. If the market can not reach this level, expect some downside continuation.”

These expectations are still in place. The 21-day EMA has since moved slightly lower to 3,790. The zone between 3,790 to 3,800 on the S&P 500 will be a significant resistance on the chart moving forward. 

Roadmap to close the week

Heading into Friday and next week, downside momentum can be expected if the market is below the zone. A break of the psychological level of 3,700 in the S&P 500 futures may result in the next leg down.

On the upside, a move above 3,800 could lead back to the psychological level of 3,900, which is also where the market fell from on Federal Reserve (Fed) Chairman Jerome Powell’s comments.

The stock market closes red again

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 closed down 1.04%, losing 39 points, while the Nasdaq closed down 1.70%, a loss of 179 points. The Dow followed, closing down 0.49%, declining 156 points.