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S&P 500 Sluggish In Early Friday Trade

The S&P 500 SPX is in the midst of a five-session winning streak, rallying from just above 2400.00 to immediately beneath 2600.00. Positive sentiment has been the norm since last December’s Christmas Eve meltdown, with bargain hunters dominating the action.

Today’s early trade is a bit surprising. U.S. CPI (Dec., YoY) came in at 1.9% during the pre-market, hitting expectations and falling from the previous release (2.2%). In addition, CPI (Dec., MoM) hit expectations, falling -0.1%.

If inflation is lagging, doesn’t that further the case for a more relaxed FED policy moving forward and cheaper capital? Shouldn’t that bit of information be welcomed news for equities bulls? At least for now, the answer to these questions appears to be no.

S&P 500: Daily Technicals

It has been a solid week for stocks, as shown by the bull-run in March E-mini S&P 500 futures. Price has broken above resistance on the daily chart and has put in a hard test of the 2600.00 handle.

March E-mini S&P 500 (ES), Daily Chart
March E-mini S&P 500 (ES), Daily Chart

Here are the levels to watch until today’s closing bell:

  • Resistance(1): 78% Current Wave Retracement, 2608.25
  • Support(1): Bollinger MP, 2559.00
  • Support(2): Daily SMA, 2521.75

Overview: Given the weakness of December in the equities markets, one has to wonder whether or not January’s rally is for real. Until proven otherwise, we have to respect the recent bullish trend. Today’s close will tell us a great deal ― if there is no profit taking on weekly gains, then institutional investors are comfortable with their intermediate-term positioning in this market.

A key technical level is coming up at 2608.25 (78% Current Wave Retracement). In the event that the March E-mini S&Ps break above 2600.00 and reject this area, a significant sell-off may be in the cards for next week’s trade.

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Shain Vernier
US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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