The S&P 500 turned lower in the lead up to Powell’s testimony before congress and largely built on that momentum heading into the weekend. The pullback has been in the offing for a while now but a complete lack of concern, expressed through the volatility index, suggested that the bullish momentum would encounter little resistance.

However, it was the 4500 psychological level that proved to be the line in the sand that markets weren’t prepared to cross. Adding to the resistance was the level corresponding to the April 2022 swing high of 4510.

Things look a whole lot different now, with the MACD on the cusp of revealing a bearish crossover and the RSI dipping back into the normal range. The question ahead of next week is whether the pullback continues to 4325 and possibly the 61.8% Fibonacci retracement of the major 2022 sell-off around 4310. If Friday’s price action is anything to go by, the bearish scenario would appear to be the base case. Next Wednesday the heads of the BoE, ECB and Fed take part in the ECB’s panel discussion during the central bankers conference in Sintra Portugal so comments made there are likely to add volatility. On Friday US PCE has the potential to move markets, where a stubborn core PCE print appears likely to see US equities head lower into the weekend.