The S&P 500 (CME: ES) is facing a cautious start to the week, extending Friday’s decline and currently trading slightly lower at 5,285.75. This hesitant price action comes amidst a data-heavy week with the Federal Reserve’s preferred inflation gauge, the Core PCE Price Index, scheduled for release on Friday, a day the US markets are closed for Good Friday.
Market participants remain focused on the inflation data, particularly the Core PCE Price Index, hoping for a reading that aligns with the Fed’s expectations and supports the recent dovish shift. An in-line or lower-than-expected reading could further solidify expectations for a rate cut in June, potentially boosting risk appetite. Conversely, a hotter-than-anticipated inflation print could dampen hopes for a rate cut and trigger a pullback in equities.
Adding to the mix is the upcoming commentary from several Fed officials, including Chair Jerome Powell, scheduled for later this week. The markets will be parsing their remarks for any changes in the central bank’s stance on inflation and future monetary policy decisions.
Technical
The 4-hour chart for the S&P 500 depicts a short-term stalemate. The index is currently hovering around the 20-SMA (green line), a key indicator for short-term momentum. The price action remains above the upward-sloping 50-SMA (blue line) and 100-SMA (orange line), suggesting a broader uptrend, with a sustained break below the 20-SMA likely to signal a potential short-term pullback.
Continued decline past the 20-SMA would leave the 5,253.25 price level as a level of interest in the short term. Therefore, short-term trading opportunities could exist towards the all-time high of 5,322.75 should the bulls regain momentum in the near term. A break above the all-time high, on high volume, could offer further trading opportunities towards the 23.60% Fibonacci extension level (5,362.00) higher.
However, with the RSI (55.49) downward-sloping above the 50.00 price level, continued bearish momentum would boost the bears’ chances of claiming the 5,253.25 price level. A successful break below the 5,253.25 price level, on significant volume, would bring the 5,194.75 and 5,157.50 price levels into play in the short term.
Summary
Amidst a mixed start to the week, the S&P 500 Index faces pivotal data releases and Fed commentary, likely to influence short-term sentiment. Technically, the index is likely to remain range-bound until the release of the Core PCE Price Index on Friday. A confirmation of the Fed’s dovish expectations could lead to a test of the all-time high at 5,322.75. Conversely, a hotter inflation report could trigger a pullback towards the 5,253.25 support level.
Sources: TradingView, Trading Economics, Morning Star, CNBC, Business Insider.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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