The S&P 500 futures (CME: ES) are on track for their sixth straight week of gains following a tumultuous week driven by conflicting economic reports. Initially, the release of US CPI data caused a notable setback as year-over-year inflation failed to ease as expected, landing at 3.1% instead of the projected 2.9%. Yet, the futures swiftly rebounded. Helped along by disappointing retail sales figures, they managed to stay in positive territory for the week.
Retail sales showed a surprising decline, with month-over-month figures hitting -0.8%, well below the expected -0.1% and a stark drop from the previous 0.4%. Investors have recently recalibrated their expectations, with the probability of rate cuts in May dropping to a mere 33% from a robust 95% a month ago. On the other hand, the likelihood of a rate cut in June is gaining traction, with the CME FedWatch Tool now indicating a 77% chance of lower rates following that meeting.
However, the week is far from over. Later today, the PPI data could inject fresh energy into the market as the week draws to a close.
Technical
On the 4H chart, an ascending channel pattern remains in play. However, there is potential for a double top formation that could trigger a pullback. The RSI trades near overbought conditions, confirming the bearish risk as we advance.
If a pullback occurs off the resistance at 5,052.75, the price action could test the 25-SMA (green line) and 50-SMA (blue line) support. Lower support at 5,000.25 could come under the spotlight if the price moves below these support levels, converging with the dynamic support of the channel to create a psychological threshold. If the channel breakdown occurs, the futures could look toward 4,982.75 and 4,960.00 as potential levels to initiate a retracement from.
However, the bullish momentum could remain intact if the price remains above the 5,031.50 support in the upcoming sessions. Resistance at 5,052.75 may then need clearance to form a new higher high, taking away the possibility of a double top selloff. Resistance at 5,066.25 could then be all that stands in the way of the futures testing new heights.
Summary
The ascending channel on the 4H chart remains in play for the S&P futures as it looks to complete its sixth consecutive week in the green. However, the PPI data due later today could still have an impact, and with a potential double-top pattern evolving, a selloff is on the cards if the price pushes below the support from the multiple SMAs.
Sources: Koyfin, Tradingview, CME Group
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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