S&P On The Cliff Edge

Price action in the ES (Emini S&P futures) is looking very interesting to the short side here. Yesterday’s large outside candle holds the potential to drive a fresh phase of weakness in the index. Following the initial downside break of the bear channel, the subsequent correction ran into heavy selling and price is now turning lower once again, testing beneath the channel. Bears can look for a break of the 3845.25 level targeting a move down to 3731.25 initially and 3613.50 thereafter. This second level marks the completion of the symmetry move with the last major correction which occurred as the pandemic unfolded in 2020.

Keep An Eye On

Fears of more aggressive action from the Fed is taking a heavy toll on risk assets this week. With markets concerned over the longer run impact on growth across the remainder of the year, and with the Fed having little choice against excessive inflation, traders are expecting at least another 1% of hikes in the coming months, likely to pull equities firmly lower near term. Incoming Fed commentary and USD data will be key for monitoring this trade with equities only likely to rebound on any significant shift in this narrative.