Stock markets went through a steep retreat earlier in April, with S&P 500 (US500), Dax, and Dow Jones (DJI) declining more than 5%, but they made a bullish move yesterday and today we’re seeing the same price action. This indicates that the retreat is complete and the bullish trend is resuming, with risk sentiment turning positive.

S&P 500 Chart Daily – The 100 SMA Held As Support

The S&P 500 index retreated from around 5,250 points to 4.950 in the previous two weeks, breaking the 20 SMA (gray) which was acting as support on the daily chart. But, the 100 SMA held the decline on Friday, and yesterday we saw a bounce off that moving average. Today the follow-up has been stronger, however now buyers are facing the 50 SMA (yellow), so they will have to do some tough work pushing above these MAs again.

The weak flash PMI data appears to have triggered a series of market movements: stocks are rising, the dollar is declining, and bond yields are also declining. Traders are likely adjusting their positions in response to the unexpected weakness in the PMI data and are questioning whether the concerns about growth and inflation, shared by both the Fed and the markets, have been alleviated. As a result, the yield curve’s shorter end is now lower, reversing the trajectory it was previously on.

Dow Jones Chart Daily – Buyers Facing the 50 SMA

Specifically, two-year bond yields have dropped by 5.4 basis points to 4.920%, after peaking earlier in the day at 5.00%. Similarly, 10-year bond yields have decreased by 4.5 basis points to 4.60%, while the yield for 30-year bonds remains high at 4.65%. In terms of the primary indices, the market reaction seems to be positive: the DOW Industrial Average is up by 0.43%, the S&P500 has risen by 0.89%, and the NASDAQ index has surged by 1.23%.

Equities continued their upward trend today, buoyed by lower interest rates and a more stable economic outlook with reduced inflationary pressures. The S&P’s global manufacturing and services data fell below expectations, with industrial activity contracting once again. Similarly, the manufacturing report from the Richmond Fed also showed weakness and contraction.

Despite the overall economic concerns, the price of equities resumed its upward trajectory today, breaking above the 38.2% retracement level at 5042 However, buyers looking for further upside potential should be cautious as this level now poses a close risk. The next target on the upside is the 50-day moving average, currently at 5120. Although the price peaked today at 5068, it still has some distance to cover to reach that level.

S&P 500 Live Chart