S&P 500, CPI – Talking Points
- S&P 500 stalls after strong 3-day rally post-FOMC
- Crypto carnage continues to weigh on risk sentiment
- Stronger dollar and higher yields return to haunt investors
The S&P 500 advance of the last 3 days has stalled out ahead of Thursday’s major US CPI report. Investors remain on edge ahead of this week’s inflation print, as CPI prints have often proved to be a source of significant market volatility. The current market forecast sees an 8% headline rate, while core is forecasted to come in at 6.5% YoY. For an in-depth preview of tomorrow’s print, please click here.
US Economic Calendar
Courtesy of the DailyFX Economic Calendar
A cooldown in US yields and the US Dollar has given equities some breathing room in recent sessions. Rumors of a potential easing in Covid restrictions in China briefly boosted risk sentiment last week, as investors quickly became optimistic about global growth prospects. This optimism was short-lived, as China released figures showing ongoing outbreaks in key cities.
Despite an upbeat mood to markets this week, all may hinge on the CPI print. The small rally in S&P 500 futures (ES) stalled out before reaching trendline resistance around 3870, and has since traded down to the key 3800 area. Tuesday’s session was technically significant, as ES closed above it’s 50-day moving average. That advance has been given up so far in today’s session, as ES currently sits right at the 50-DMA at 3803. This area is a major inflection point for S&P 500 futures, given the convergence of key technical indicators.
S&P 500 Futures 1 Hour Chart
Chart created with TradingView
Bears will be looking to take ES below the 50-day moving average into the close. Whether they can or will is another story. The door remains open for bears, who have notably shifted price out of the strong uptrend that was carved out over the past 3 sessions. Traders should remain nimble, as this may just be a head fake lower ahead of tomorrow’s print. With interest rate volatility likely to be elevated given that traders will look to reprice Fed expectations in tomorrow’s premarket session, traders should be aware that large swings in price are likely going into and after tomorrow's print.
With this in mind, bulls have their work cut out for them. Descending trendline resistance from the August high continues to be an impediment. Should we break and also CLOSE above this area, we may begin to talk about a regime shift. A move through that resistance could spark a rally into the 4000-4100 area as we move into the holiday season.
Overall, the trend remains lower when you back out to a longer timeframe. Should we get a hot print tomorrow morning, ES could give back additional gains and slip to key support around 3720. Attention now shifts to the CPI print, as market participants eagerly await both the outcome and the implications it has on Federal Reserve policy.
S&P 500 Futures Daily Chart
Chart created with TradingView
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--- Written by Brendan Fagan
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