Chart of The Day S&P500
S&P500 Probable Price Path & Potential Reversal Zone
Global risk sentiments stalled ahead of the FOMC meeting even as the IMF raised its 2021 global growth forecast from 5.2% to 5.5%. The upgrade was mainly due to the US (5.1% versus 3.1% previously) whereas the Euro-area was cut by 1 percentage point to 4.2% and the UK by 1.4 percentage points to 4.5%. Meanwhile, Covid cases crossed 100 million globally, with the UK surpassing 100k deaths, and Japan is likely to extend its state of emergency. The S&P 500 retreated 0.15% yesterday but VIX slipped to 23.02. On the US earnings front, Microsoft beat sales forecast with $43.1bn and AMD and Texas Instruments were also upbeat on sales, whereas Starbucks’s same-store sales fell by a worse-than-expected 5%. Other gainers included 3M, J&J and GameStop. Market attention now turns to Apple, Facebook and Tesla. UST bonds pared losses amid a record $61bn 5-year auction, with the 10-year UST bond yield hovering around 1.03%. There is still another $62bn of 7-year bonds to be auctioned. The 3-month LIBOR was at 0.2185%. Elsewhere, China’s PBOC unexpectedly drained liquidity from the interbank market which contributed to interbank market funding cost and stock market volatility.
The main event to watch is the FOMC decision, but we do not expect any tweaks in its policy settings, although the FOMC statement is likely to acknowledge the recent softening in US economic data prints, especially on the labour market front. Fed Chair Powell is also likely to continue to sing a dovish tune, reiterating the need for continued policy accommodation amid the rising Covid scourge at least until vaccination efforts make more headway, and there are no intentions to taper its bond purchases pace anytime soon.
From a technical perspective counter trend traders will watch for bearish reversal patterns on a quick rejection from the 3890/3910 area, (note the intraday divergence that is developing on the Psych indicator which acts as an additionally confirmation for the corrective thesis) such price action would warrant cautions bearish exposure initially targeting a move to test 3820/30 the monthly pivot which held on the quick test we witnessed on Monday, a failure for fresh demand to re-engage in this area would open the potential for an extension to the downside to test support back to 3760
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