S&P 500 futures are looking stretched. The U.S. government most likely will not default on its debt, yet confidence in the market is being tested. Liquidity is not as tight as it could be.

(Chart 1)

It is probably unlikely that the U.S. Government will default in its debt.  But, with confusion on interest rates and guidance from the Federal Reserve only adding to the current fragility in financial markets.  Wall Street is still calling for rate cuts in 2023 which bizarre in its sentiment, but understandable that the masses of debt being held on balance sheets, which is financially more and more difficult to service with high interest rates; thus causing strain to interbank deposits.  And of course inflation has become imbedded.  The whole thing is a house of cards.

Markets have rallied on the back of the bank bailouts, Fed's balance sheet swelling back to its 2020 COVID underwrite at 80 Trillion and the push and pull on the U.S. Dollar +10 YR yield.  All having an effect on equites, which as you can see with Chart 1, re:  S&P 500 Futures, are supported at 3968 (Powell 'Put') and the price support at 3933.  The trading range is becoming narrower by the day, resistance is at 4189 (green horizontal line).

It could go either way.

Caution is the play.