USA500
US equities are starting off Q2 on the front foot after a surprise China Caixin manufacturing boost to expansion territory at 50.8 in March. That lit a fuse under China’s CSI 300, which rose 2.6% and gave some fresh impetus to the trade negotiations bid. Japan’s Nikkei rose 1.4% as well and the Hong Kong Hang Seng bounced 1.7%. That in turn contributed to 1.6-2.0% gains on European majors, though data there was more mixed.
The USA30 is 208-points firmer, USA500 gained 20-points and USA100 is 68-points higher in pre-market trade. Retail sales was a mixed bag, with headline and ex-auto readings negative, but the month prior revised up sharply, leaving the pre-open equity rally intact.
US Retail sales declined 0.2% in February, and fell 0.4% higher excluding autos, weaker than expected. However, the 0.2% January gain was revised up to 0.7%, while the 0.9% ex-auto result was bumped to 1.4%, so that offsets some of the February slip. The headline reading and the broadbased declines in February were offset by big upward revisions to January, leaving the report something of a wash. The retail sales report provides the most significant “hard data” support for the market’s pessimistic outlook, and it looks like this will remain the case for another month.
A heavy second round of data will include ISM, construction and inventories. The Dollar index is off 0.15% near 97.09, while EURUSD up 10 points over 1.1245, and USDJPY toward 110.80 from near 111.00.
Meanwhile in the equity market, the USA500 still posted the best quarter in a decade, while so far today, holds floor at 2849.70 (R2 for the day).
After the 3-day bullish performance away from 2784 lows, and as short-term but also medium term momentum indicators are positively configured, further incline is expected for USA500. Intrday, RSI retests overbought barrier suggesting that there is further upside area to be covered, while MACD has posted a bullish cross above neutral zone. The Golden cross identified on March 28 between 50- and 200-day SMA adds further positive bias to the outlook.
Next Resistance for USA500 on the break of latest’s peak at 2,856.72, stands between the March 21 high and R3, at 2,860.85-2,862.95 area. Further gains could trigger our attention towards January 2018 peak at 2,875 and 2,907. Immediate Support is set at Friday’s close, and the longer timeframe Support at 20-day SMA at 2822.
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Andria Pichidi
Market Analyst
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