The S&P 500 futures (CME: ES) took a turn for the worst in a rally spurred by the hopes of an economy that may find mercy from the wrath of higher interest rates, a topic that continues to exhaust even the most optimistic traders. However, strong PPI and retail sales statistics signalled an economy running hotter than anticipated on its way to recovery, forcing the Fed to consider the disappointing reality of further rate hikes.
The futures closed Thursday trading down 2%. Lower than-expected jobless claims reiterated the sentiment of a persistently tight labour market, with inflation turning out to be more sticky than anticipated in the early-year optimism. The US 10-year yield jumped to 3,86%, with the dollar strengthening further at the expense of equities.
A breakout to the downside of the consolidation triangle has pushed the futures down to current levels of 4069,50. The downtrend is approaching crucial support at 4058,50. It is possible for a correction to take place, for the futures to retrace back to 4081,25 (solid black line) before continuing the downward momentum. If the market resists at 4081,25, there could be a bounce back and a continuation towards support at 4058,50. A breakout below support could provide the bearish momentum to continue to 4008,25. The futures are edging towards oversold conditions, and consolidation is possible between the support and resistance levels of 4058,50 and 4081,25 until the FOMC minutes and GDP growth statistics due next week are released.
A retracement of the recent downturn in the future is possible towards support at 4081,25. After that, the futures could potentially continue the downturn to look for support at 4058,50. The market may experience more consolidation in the next few days of trading until more economic data becomes available.
Sources: Koyfin, Tradingview