After posting a strong two-week consecutive gain, the S&P 500 index gave back those gains last week closing on a bearish note.
This comes even as the index tested new all-time highs prior to the decline.
For the moment, prices are testing their rising trendline. And, as a result of a break out from this trend line, they could see a correction down to the 3674 level.
Here, we see a confluence of the 9th November swing highs, as well as the 50-day moving average. Therefore, there is a very good chance that the S&P 500 index will establish support at this level.
In the event that the index loses support at 3674, then we expect to see a sharper retracement taking place.
Eventually, the S&P 500 index could correct lower to the 3388 level. However, one of the things to factor in is the fact that this coming week, the new Democratic administration under Joe Biden will take office.
Therefore, the S&P 500 index is likely to make a possible rebound to the upside.
This could potentially mean that the equity index could once again resume the gains and recover to post new all-time highs.