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S&P 500 Price Update: US Equities Appear Upbeat Ahead of Major Event Risk

S&P 500 Price Update: US Equities Appear Upbeat Ahead of Major Event Risk

Richard Snow, Analyst

US Equities, S&P 500 News and Analysis

  • Risk appetite rises on hopes of looser Covid policy in China
  • Disney, AMC Entertainment and Occidental Petroleum to release Q3 earnings after market close today
  • US equities Monetary policy and inflation remain
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Risk Appetite Rises on Hopes of Looser Covid Policy in China

Details remain rather unclear regarding China’s revisions on Covid regulations but markets saw the mere mention of potential changes as a positive sign, resulting in continued gains after Friday’s move higher. China has announced its intention to revise the quarantine rules for foreign visitors in an attempt to stimulate the tourism sector, at a time when China is experiencing economic challenges.

However, yesterday Beijing confirmed that the strict zero-Covid strategy meaning that if there are to be any significant changes, those are more likely to materialize next year rather than this year and the reopening process is likely to be gradual in nature. Nevertheless, the S&P 500 futures continue to trade higher this morning, building on Monday’s gains. After market close there are a number of noticeable Q3 earnings reports, listed below.

Notable Q3 earnings reports this week:

  • AMC Entertainment (today) after market close
  • Occidental Petroleum (today) after market close
  • Walt Disney (today) after market close
  • Rivian (Wednesday) after market close

US Equities Technical Analysis (S&P 500 E-Mini Futures)

US equities trade higher ahead of significant event risk on Tuesday as well as inflation data on Thursday and consumer sentiment on Friday. While Q3 earnings thus far, failed to impress, US companies remain fixated on the path of monetary policy as the hawkish Fed tighten financial conditions and have come to terms with the likelihood of tightening into a recession. This far, despite technically having entered a recession in Q2, economic fundamentals have shown otherwise with a robust labor market (although more and more companies are talking about layoffs), combined with a surprising 2.6% expansion in GDP for Q3.

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A bullish continuation highlights the 3860 level before the 23.6% Fib at 3915 however, the ATR indicator reveals that volatility remains rather elevated and considering this week’s event risk, we may be in for some choppy price action. A CPI print less than 8% may reinvigorate those hoping for a change in Fed policy sooner than communicated and lift risk appetite, however short-term it may prove to be.

Should inflation continue to remain elevated, the long-term trend may come back into play once again. Levels of support to note come in at 3820, followed by 3727 and the 3640 level.

S&P 500 E-Mini Futures (ES1!) Daily Chart

image1.png

Source: TradingView, prepared by Richard Snow

US 500 Client Sentiment

image2.png

US 500:Retail trader data shows 57.77% of traders are net-long with the ratio of traders long to short at 1.37 to 1.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests US 500 prices may continue to fall.

The number of traders net-long is 0.27% higher than yesterday and 11.29% higher from last week, while the number of traders net-short is 7.93% higher than yesterday and 10.84% lower from last week.

Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed US 500 trading outlook

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--- Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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