The S&P500 Futures (CME: ES) have recently experienced a shift in momentum after a remarkable streak of five consecutive weeks of gains.
This week, however, marked a potential turning point as the index futures edged towards their first weekly decline in five weeks, shedding 42 basis points week-to-date. The market’s reaction to hotter-than-expected inflation in the U.S. played a pivotal role in this downturn, with January’s inflation rate of 3.1% surpassing market expectations by 20 basis points.
Consequently, the probability of a rate cut in May was repriced down to 32% from 50% a week prior, triggering a boost in the Greenback and leading to a retreat in risk assets. Despite this, the S&P500 Futures have garnered significant attention for reaching fresh highs this year, propelled by optimistic earnings results, particularly in the tech sector. Notably, Nvidia’s recent ascent above Google-parent Alphabet, elevating it to the position of the third-most valuable U.S. company, highlights the sustained potency of specific sectors that are propelling the index futures market.
Technical
In Wednesday’s trading session, the S&P500 Futures showcased resilience, staging a recovery after two consecutive days of losses.
The futures are currently trading in an uptrend, positioned above the 100-day moving average, indicating overall bullish sentiment in the market. The rally originated from a support level established at 4866.00, triggered by oversold RSI conditions, signalling a strong buying interest.
However, as the futures climbed to 5066.50, overbought RSI conditions emerged, limiting further upside momentum and prompting a retracement. This retracement found support at the 61.80% Fibonacci Retracement Golden Ratio, where oversold RSI conditions prevailed, leading to a bullish reversal. If the current upside momentum persists, there’s potential for a retest of the 5066.50 level. Conversely, if bearish pressures resurface, the Golden Ratio could act as a key support level, influencing a downward movement in prices.
Summary
Despite the recent downturn, the S&P500 Futures demonstrate resilience, rebounding from a 2% week-to-date loss. Trading above the 100-day moving average, with support at 4866.00 and resistance at 5066.50, technical indicators suggest a potential retest of resistance levels if bullish momentum persists, reflecting market optimism.
Sources: U.S. Bureau of Labor Statistics, Reuters, Wall Street Journal, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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