S&P 500 attempts to hold onto a key support level.

The S&P 500 index is currently teetering on the edge, desperately holding onto a crucial support level. This level has proven its resilience with two prior bounces, so traders are keeping a close eye on whether it can endure the pressure once more. After enduring four consecutive red days, there was a sigh of relief overnight as the market managed to post a green day, coinciding with the critical support level.

The broader picture reveals a challenging September for the S&P 500, with a monthly decline so far of 3.78%, following August’s 1.77% drop. Lingering concerns of an impending recession, coupled with the Federal Reserve’s unwavering commitment to maintaining higher interest rates for an extended period, have been the driving forces behind this recent downturn.

Monday’s bounce brought some respite, suggesting that investors might be regaining their composure after several days of selloffs. From a technical standpoint, the current support level is important. Should it fail to hold, the index could potentially see a further decline of 2-3%, targeting the next horizontal support level.

Interestingly, there is another layer of support not far below the current horizontal level in the form of a diagonal support line. This diagonal support line could be something for traders to watch, as it could act as a potential area of activity if the horizontal level falls.