S&P 500 drops below 4700 as investors’ focus on the Fed

• The S&P 500 falls 1.11%, sits currently at 4,615.85.
• The Nasdaq and the Dow Jones Industrial lose between 0.44% and 1.74%, down at 15,802.13 and 36,494.29, respectively.
• S&P 500 Technical Outlook: Remains bullish, but a negative divergence between price action and the RSI could send the S&P lower.

The S&P 500 falls during the New York session, is at 4,615.85, down 1.02%, after the US Producer Price Index for November rose the most since 2010, following the last week’s CPI footsteps, as pressures mount on the Federal Reserve to tighten monetary conditions, faster than expected.

US Producer Price Index rises the most in eleven years

The market sentiment is downbeat, as the cycle of easy money is about to end. Today, the Department of Labor revealed that producer prices jumped by 9.6%, more than the 9.2% foreseen. Also, the so-called Core Producer Price Index rose by 7.7%, higher than the 7.2% estimated by analysts.

The markets reacted negatively. Following the S&P 500 footsteps, the Nasdaq falls 1.74%, down at 15,802.13. The Dow Jones Industrial could not be left behind, losing 0.44%, currently at 36,494.29.

In the meantime, the so-called “fear index,” the CBOE Volatility Index (VIX), rises almost 12%, currently at 22.70, as investors scramble to get out of stocks, moving towards cash or other assets, as the Fed last monetary policy meeting looms.

Sector-wise, the gainers are led by financials, energy, and materials, each rising 0.61%, 0.29%, and 0.02%. The biggest losers are technology, communication, and real-estate, down 2.18%, 1.39%, and 1.37%, respectively.

On Wednesday, the US economic docket will feature the Retail Sales for November, alongside the critical Federal Reserve monetary policy decision.

S&P 500 Price Forecast: Technical outlook

The S&P 500 remains in an uptrend, as shown by the daily chart, with the 50, 100, and 200-day moving averages (DMAs) below the price action. However, it appears to be forming a double-top around 4,700, which coincides with a negative-divergence in the Relative Strength Index (RSI), which at press time is below the 50 mid-line, at 49.

In the event of breaking to the downside, the first support would be the 50-DMA at 4,591.13. A breach of the latter would expose the confluence of the December 3 low and the 100-DMA around the 4,500-4,515.84 range, followed by the intersection of October 13 low and the 200-DMA around the 4,325-4,341.31 area.