The S&P500 Futures (CME: ES) enjoyed an impressive rally, reaching a 15-month high, which bares no surprise given the drop in US headline inflation from 4% to 3%. This decrease in inflation has alleviated the need for further interest rate hikes, thereby boosting sentiment in the equity market.
Furthermore, the Michigan Consumer Sentiment exceeded expectations, rising from 64.4 to 72.6. This increase boasts a year-to-date high, fuelling positivity in stocks and the overall US economy. However, core inflation remains high, which may encourage the Federal Reserve to hike interest rates one more time before the year’s end, threatening the Futures’ upward trend. Will the Federal Reserve remain hawkish, or will the 15-month high be the first of many records broken?
Technical
The upward trend of the S&P500 Futures etched its way to new heights, establishing major resistance at 4557.5. However, a slight pullback could threaten the upward momentum of the index futures and drive downside pressure towards the 4514.25 support at the 23.60% Fibonacci Retracement. If this support level fails to hold, the 4413.25 support at the 78.60% Fibonacci Retracement may mark a pivot point for a reversal.
However, the index futures are currently trading in the green, which may encourage the bulls to retest the 4557.50 major resistance, where a breakthrough may mark the continuation of the upward trend.
Summary
The S&P500 Futures enjoyed an impressive rally due to cooling inflation in the US; however, a recent pullback may apply downside pressure towards the 4514.25 support. If this support fails to hold, the index futures may be subjected to lower levels of support; however, a slight leg up, since the index is trading in the green, may encourage the bulls to retest the 4557.5 major resistance.
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