There has been an improved tone in the markets since the end of March amid the ongoing firming in risk-appetite that supported the US equity futures. Appetites have been whetted by rising optimism that lockdown measures will continue to be eased, allowing the domestic economy to gradually reopen. What had been an ongoing slashing of growth estimates also appears to have run its course, supportive of risk as the market has been spared frequent high profile downgrades of the near and medium term growth projections.
After Wall Street put in its best month since 1987 on those hopes, so far in May the indexes have continued to sag again on worries that the reopenings of the states will be slow and disjointed, that there will be a second wave of the virus, and that consumption and production won’t get back to normal this year. And adding to the uncertainties over the timing and extent of a bounce were weak data reports which started to capture more of the impacts and discouraged hopes for a quick, V-shaped bounce. Rather dismal outlooks from the Fed and ECB weighed on investor sentiment as well, even as the banks confirmed they are “all in” to support the financial markets. And finally, fears of resurgent US-China tensions added to the bearish tone as President Trump contemplates reparations.
Hence, after stocks suffered their worst quarterly declines since the financial crisis in late 2008, the second quarter looked to be a more favourable one. The USA500 rose 31% from its lows reached March 23, through April 29. However the closing on Monday May 4 below the 20-day SMA, and the decline by 6.5% from 2975 (April 30) triggered the attention of many analysts.
That said, we have seen technical strategists at JPMorgan Chase & Co. to say the index has likely formed a medium-term ceiling.
“The S&P 500 Index staged a bearish reversal week after moving deeper into the large confluence of resistance levels surrounding 2,900,” an area that likely caps the equity range through the second quarter, strategists Jason Hunter and Alix Tepper Floman wrote in a note Friday. “While the two-day pullback from that key resistance area is only tentative at this point, it at least marks a continuation of the trend deceleration pattern that started in mid-April.”
“A break below 2720 would confirm a short-term top. We are focused on two primary support areas, 2640-2665 and 2450-2485.”
Click here to access the HotForex Economic Calendar
Andria Pichidi
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
