S&P 500, Nasdaq 100 Outlook: Bears Attack Yearly Lows
12:06, 11 October 2022
S&P 500 | Attacking Yearly Lows
Familiar price action with global equities on the back foot as bond yields continue to edge higher. As I mentioned last week, the misplaced view that market participants were riding on the hope of a possible central bank pivot, did leave equity markets at risk of another bear market rally. Consequently, the subsequent US data, namely the most recent NFP report dented the view that the Federal Reserve would ease up on tightening policy aggressively. That being said, the main economic data to watch this week, will be the upcoming US CPI report where it does feel that market participants are gearing up for a higher-than-expected figure. I say this on the basis that in the lead to the CPI report, the USD has continued to go from strength to strength, bond yields are nearing recent highs, albeit exacerbated by UK bond yields and US equities are testing yearly lows.
US CPI Expectations
CPI Y/Y 8.1% (Expected), 8.3% (Previous)
Core CPI Y/Y 6.5% (Expected) 6.3% (Previous)
Key Support Underpins Yet Again
Once again the S&P 500 has been held up by the 200WMA (3595), which has acted as key support since the start of the quarter. At the same time, this morning’s headlines out of Russia, in which Foreign Minister Lavrov stated that Russia would mull over a potential Biden-Putin if proposed by the US has slightly eased some of the negative sentiment today, albeit marginal at best. As I have said previously, the bias remains for rallies to be faded, however, there appears to be little appetite to increase bearish exposure around the yearly lows prior to the release of the US CPI report on Thursday.
Should the index post a closing break below its 200 week moving average, the risk would be for a move towards 3500 (Aug 2020 high), which protects the pre-covid peak at 3395. Meanwhile, on the topside, near-term resistance resides at 3800 (last week's highs)
What is your sentiment on US500?
S&P 500 Chart: Weekly Time Frame
Nasdaq 100 | Bearish Momentum Temporarily Slowing
While the Nasdaq 100 posted its lowest close since July 2020, bearish momentum in the tech-heavy index has become slightly exhausted as the RSI has failed to make a lower low. Now, this does not suggest that the outlook is no longer bearish, to me it still remains the case that it is, particularly with global bond yields accelerating higher. However, an argument can be made for a possible reprieve in the short run, which would ultimately depend on the outcome of the US CPI report.