The S&P500 Futures (CME: ES) faced a tumultuous week as geopolitical tensions and inflation concerns weighed heavily on U.S. stocks. Ending the prior week down by 1.63%, marking the second consecutive week of losses, the index futures hit a four-week low amidst the challenging market landscape.
Heightened tensions surrounding the Russia-Ukraine conflict and escalating issues in the Middle East prompted investors to seek refuge in safe-haven assets like Gold and the U.S. Dollar, leading to a 70 basis point rise in the Gold Spot Price (XAUUSD) and a significant 1.66% surge in the Dollar Index (DXY) last week.
Additionally, U.S. inflation accelerated to 3.5%, surpassing previous readings and expectations, consequently postponing expectations of a rate cut from June to September. Amidst this backdrop, the commencement of the first-quarter earnings season, particularly reports from major banks, provided a critical gauge for traders assessing the underlying assets within the S&P500. As market participants navigate through these uncertainties, the performance of the S&P500 Futures remains closely watched, reflecting broader market sentiment and economic fundamentals.
Technical
The S&P500 Futures have been navigating a downtrend recently, trading below the 100-day moving average and exhibiting downside pressures evident in the formation of a descending channel pattern.
Resistance materialized at the channel’s upper boundary around the 5257.50 level, fueling selling pressure and contributing to the futures’ decline. However, amidst this bearish sentiment, the market found support at the 5150.00 level, particularly notable amid oversold RSI conditions.
As the new week commenced, the index futures began to rebound, trading 50 basis points higher during the London session. This upward movement initiated a retracement towards the 38.20% Fibonacci Retracement level, indicating a potential shift in momentum. Should this upside momentum persist, traders may look towards the 50% Fibonacci level as a point of interest to the upside. Conversely, a resurgence of downside pressures could prompt a retest of the 5150.00 level, potentially indicating a continuation of the current bearish trend.
Summary
In conclusion, the S&P500 Futures faced challenges amid geopolitical tensions and inflation worries, reflected in a 1.63% weekly decline last week. Technical analysis reveals a potential rebound, with support at 5150.00 and resistance at 5257.50. Market sentiment remains pivotal amidst uncertainties, guiding traders as they navigate key technical levels.
Sources: U.S. Bureau of Labor Statistics, CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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