S&P 500, Nasdaq Analysis
- US inflation data sends riskier assets faltering
- S&P 500, Nasdaq key technical levels as equity markets attempt to halt decline
US inflation data falters risk assets
It’s surprising how sensitive markets have become to print data of high importance, none of which are more important. inflation (CPI) data now. Of course, it is expected that high importance data is likely to cause a fair amount of volatility in the moments before and after the release of said data.
The heavy sell-off in US equities and riskier assets in general appears to have quelled the optimism that had been priced in, reflecting the outlook that inflation was about to decline in August. This is a typical market reaction to omissions in important data when participants were clearly on the wrong side of the actual print. The more surprising element of all this was the rising expectation, or perhaps pure optimism, that the Fed rate hike was enough to discuss policy once inflation had largely calmed down.
The Fed has made clear that cooler inflation prints are not enough to warrant a change in course and that “compelling evidence” of a fall in inflation is what the committee is interested in before considering a recession in the current hiking cycle.
Price Action After CPI Determination
S&P 500 e-mini futures sold a massive 5.5% yesterday alone, with price action Trying to keep the line above 3950 this morning – a area of support, 3950 level and 23.6% fibonacci Retracement of the 2022 key move at 3915 is crucial for a bearish continuation with the 3860 level, as the price failed to test this level earlier this month.
If we are to hold on to 3950, the next level of resistance appears at 4030, followed by yesterday’s high around 4130. However, as we continue the Fed’s blackout period, it is likely that interest rate expectations will continue to climb, supporting and losing weight in the dollar. Equity, as the market is currently trading up 75 basis points with around 75% potential and around 30% 100 bps growth potential.
S&P 500 E-Mini Futures Daily Chart
Source: TradingView, prepared by Richard Snow
|
change in |
longitude |
Shorts |
oi |
| Daily | -1% | -1% | -1% |
| weekly | -2% | 1% | 0% |
The chart below has been zoomed out to reveal a longer term downtrend which is well maintained. The recent progress was not even enough to test the descending trend line and hence the market outlook of ‘sell in strength’ remains constructive.
S&P 500 E-Mini Futures Daily Chart – Zoom Out
Source: TradingView, prepared by Richard Snow
IG Client Sentiment: Long & Shorts near 50/50, Outlook uncertain
US 500, Retailer data shows 48.13% of merchants are net-long With a ratio of short to long traders at 1.08 to 1.
We generally take the opposite view of the spirit of the crowdAnd the fact that traders are pure-short suggests that the US 500 price may continue to rise.
Net-long traders are up 16.08% from yesterday and down 8.13% from last week, while net-short traders are up 12.84% from yesterday and up 6.04% from last week.
Positioning is less net-short than yesterday but higher net-short than last week. Combination of current sentiment and recent changes Gives us a more mixed US 500 trading outlook.
Begins in:
live now:
September 19
( 02:09 GMT )
Recommended by Richard Snow
Cross-Market Weekly Outlook
Nasdaq presents clean sell-off from first trendline support
The Nasdaq presents a similar case for the S&P 500 as we would expect, but technically, the former produces a clean rejection of the ascending trendline that was associated with previous higher lows.
The index is trading below 12,259 with support at an earlier low of 11,921.50 followed by 11,540. Resistance is found at 12,250 and then at 12,950 level.
Nasdaq E-Mini Futures (NQ1!) Daily Chart
Source: TradingView, prepared by Richard Snow
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— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardusnowFX
