S&P500 Futures (CME: ES) have recovered losses incurred from the selloff caused by the banking sector crisis as panic was overturned by optimism. The return to risk-on sentiment could be a sign of the ending of the banking sector crisis or the worst of it. As bullish traders march forward, the S&P500 futures have gained almost 2% week-to-date.

The Federal Reserve’s favourite gauge of inflation, the PCE Index, will be the next curveball traders need to deal with for the week. The PCE Index is forecast to taper off on a monthly and yearly basis, suggesting the cooling off of the U.S. economy and the effectiveness of past rate hikes.

Technical

The S&P500 Futures uptrend is unscathed, following price rejecting and bouncing off the 100-day moving average at the 3980.00 level, now set as a support level. The resistance level was established at the 4073.25 level, following a reversal from the level in the prior week.

With bullish traders firmly in control, the price is knocking on the door of resistance at the 4073.25 level. If bullish traders marry the upside, a high volume breakout above the resistance level could likely play out into an extended move higher. Bulls will be looking to the 4168.50 level with interest if the index moves higher.

On the other hand, a prior rejection of the resistance level could entice bearish traders to conglomerate at the price level, which has had supply exceeding demand before. If bearish traders outdo bulls, the S&P500 futures could move lower, with the next probable target set at the 3980.00 level.

Summary

If the PCE Index comes in hotter-than-expected, bullish traders could be turned off by the possibility of more interest rate hikes to come. Alternatively, if the PCE Index comes in lower than forecast, the S&P500 Futures could realise upside gains as traders turn optimistic over the possibility of a more dovish Federal Reserve.

Sources: Insider, TradingView