The SP500 reached key resistance forming a failed first breakout attempt. The zone is formed by a strong horizontal resistance, the 50% fibo corrective level of the downward movement.
At the levels locked between 4170 / 4212 Sequential printed a 9 with a pin bar with a tail entering the middle of the bullish depletion signal zone and the Demarker oscillator entered deep into the overbought zone and rotated reinforcing the depletion of the bullish formation / on the previous oscillator rotation above the levels from 90 followed a strong downward movement for the index/. In addition, today’s Kendall failed to rebound from the short-term uptrend line, and the breakout further initiated the closing of long positions to take profits.
Today, the risk-on sentiment is fading, also supported by meme stocks, which saw significant declines in the current trading session, as well as expectations for the US CPI data tomorrow.
Shares such as GME, AMC and BBBY are down between 7 and 20% today after yesterday’s gains. The Cleveland Fed’s consumer price index gauge is being taken as an indication that tomorrow’s data will be higher. Markets expect values of 8.7%, but the gauge shows that the data on inflation growth will be 8.8%. And the expectation of worse data has a negative impact on the market.
Higher inflation rates will force the Fed to act with a sharp rate hike, and this will continue to weigh on the markets. The SP500 will have the potential to break support at 4086 and the Sequential will form a new downtrend. In the event of a breakout, quotes will head for a test of the first more serious support at 3935/50 and 23.6 Fibo at 3916.
Lower inflation readings will renew bullish enthusiasm and a rebound from current support will push prices back into the ascending channel, with a fresh attempt to break through resistance and a move to 4337/49 for a test of key trend resistance of the medium-term descending channel and 200 MA.
Head of Trading Dimitar Kalapov