S&P 500 Forecast: The SPX Pulls Back from Highs Despite the End of the Government Shutdown

In the current trading session, the S&P 500 Index (SPX) is down more than 1.5%, consolidating a steady bearish bias as the week draws to a close. Although an agreement has been reached to end the U.S. government shutdown, investor confidence in equities has yet to fully recover. Uncertainty surrounding monetary policy continues to exert persistent selling pressure on the index, which could influence price action in the coming sessions.

The End of the Government Shutdown

After 43 days of government paralysis, a temporary funding agreement was finally approved and signed by Trump, effectively ending the shutdown—at least until January 30, 2026. While this measure resolves the issue in the short term, it does not eliminate the risk of another similar political event in the near future.

For now, federal services and the transportation sector have resumed operations, although delays in key economic reports—such as employment and inflation data—persist. These metrics are crucial for the Federal Reserve’s policy decisions, and their absence has made it difficult for the central bank to clarify whether it will proceed with a 0.25% rate cut at its upcoming December 10 meeting.

Given this backdrop, although the market initially welcomed the end of the shutdown, it appears that optimism had already been priced into major equity indices like the SPX. This explains the lack of a positive reaction following the announcement, especially since the deal is temporary and uncertainty remains over the direction of fiscal and monetary policy. As a result, market indecision has increased, leading to short-term weakness in key SPX components.

Indeed, this weakness is reflected in the performance of the five largest components of the index: Nvidia fell -4.72%, Apple declined -0.08%, Microsoft dropped -1.35%, Amazon slid -2.39%, and Alphabet lost -2.91% in today’s session. This demonstrates that despite the positive political news, the market’s reaction remains subdued, and the SPX continues to show broad-based weakness across its main constituents.

Source: Slickcharts

Therefore, despite the political resolution, ongoing challenges in reaching a long-term funding agreement between the government and the Senate continue to weigh on equity demand. Additionally, the lack of updated economic data has led to uncertainty within the Federal Reserve, reinforcing the possibility that this macro-level indecision could continue to affect the SPX in the short term. If this sentiment persists, selling pressure could intensify further.

 

Is Risk Appetite Fading?

The market’s current indecision is also reflected in the VIX Volatility Index, which has surged more than 15% over the past two sessions, surpassing the 20-point level. This represents one of the sharpest increases in recent weeks and signals rising 30-day volatility expectations for the SPX, highlighting growing investor nervousness in the short term.

Source: CBOE

A similar trend can be observed in the Fear & Greed Index, which has fallen back into the “extreme fear” zone with a current reading around 23 points. This suggests a limited appetite for risk assets, including the SPX, and reinforces the notion that the market has entered a phase of caution and uncertainty.

Source: CNN

Given this environment, as market confidence continues to deteriorate, the SPX will likely struggle to sustain steady demand in the short term. This could lead to heightened selling pressure if sentiment fails to recover in the coming sessions.

 

S&P 500 Technical Outlook

Source: StoneX, Tradingview

• Uptrend Under Review: The latest bearish movement in the SPX is testing the long-term uptrend structure that has dominated the chart in recent months. A break below the 50-period moving average could weaken this formation, paving the way for a phase of uncertainty or even a short-term consolidation to the downside.

 

• RSI: The RSI line maintains a steady downward slope, approaching the neutral 50 level. This indicates a loss of bullish momentum and a potential rise in selling pressure, which could reinforce the bearish trend in the coming sessions.

 

• ADX: Meanwhile, the ADX indicator has started to climb gradually and is now hovering near 20, suggesting that while volatility remains moderate, it may continue to increase. This could point to an environment of uncertainty and greater price swings in the SPX over the next several sessions.

 

Key Levels to Watch:

• 6,917 points – Major Resistance: Corresponds to the index’s all-time highs and represents the most important bullish barrier in the short term. A sustained close above this level could open the door to new record highs, reviving the broader uptrend that still holds.

 

• 6,707 points – Intermediate Support: This level aligns with a recent retracement zone and the 50-period moving average. A break below this area could signal an end to the current uptrend, shifting the market toward a bearish bias.

 

• 6,490 points – Key Support: Marks the most recent low on the chart. A drop below this level could initiate a new short-term downtrend, adding to selling momentum in the index.

 

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25