The S&P 500 Index Futures (CME: ES) are attempting to bounce back after a hefty 1.37% tumble on Tuesday, triggered by hotter-than-expected inflation data. While the year-on-year inflation rate eased slightly to 3.1%, core inflation remained stubbornly high at 3.9%, exceeding expectations and dashing hopes of near-term Federal Reserve rate cuts. This unexpected development sent shockwaves through the market, particularly impacting rate-sensitive sectors like technology.
However, Wednesday morning paints a slightly different picture. Stock futures are edging higher, suggesting a potential recovery as investors begin to digest the inflation data and reassess their outlook. Despite Tuesday’s sell-off, the overall market sentiment remains positive, fuelled by strong earnings reports and a belief in the long-term economic recovery. This underlying bullishness could provide support for the index.
Technical
The 4-hour chart shows that the index recently broke below a rising wedge pattern and its 20-SMA (green line), indicating a potential trend reversal. However, it found support at the crucial 100-SMA (orange line), highlighting underlying bullish sentiment. The 20-SMA remains comfortably above the 50-SMA (blue line) and 100-SMA, suggesting a longer-term bullish bias. This confluence of moving averages could act as a dynamic support zone.
The RSI indicator (43.19) is recovering from oversold territory, suggesting a potential bounce in the short term. Short-term trading opportunities could exist towards the 5,004.25 resistance level should the index’s recovery sustain. A break above the initial resistance would leave the 5,061.25 and 5,100.00 resistance levels as the next significant barriers higher.
However, a failure to break above the 50-SMA could offer short-term trading opportunities towards the initial support at 4,957.00. A break below the initial support would bring the 4,924.75 and 4,868.50 support levels into play in the short term.
Summary
The S&P 500 faces a critical juncture. While technical indicators suggest a potential short-term bounce, the overall market sentiment remains cautious due to inflation concerns. Initial support lies at 4,957.00 (50-SMA), followed by 4,924.75 (100-SMA) and 4,868.50. Initial resistance is at 5,004.25 (50-SMA), followed by 5,061.25 and 5,100.00.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
