S&P 500 Technical Analysis
The S&P 500 has fallen rather hard during the trading session on Friday, as we continue to see a lot of negativity entered the stock market. During the Friday session, Core PCE Price Index month over month came out, with a 0.6% number instead of the expected 0.4%. Furthermore, the previous month was revised from 0.3% to 0.4%, showing that inflation is still a major issue. Beyond that, Personal Spending also rose 1.8%, more than the anticipated 1.4%, showing that US consumers are being extraordinarily stubborn, and this should continue to cause issues with inflation.
Wall Street has had a narrative as of late that the consumer is in great shape due to pandemic savings, but the reality is that most of the spending is being done on credit cards at the moment. Smart money is starting to see that a mix between that and the Federal Reserve keeping monetary policy tight for longer than anticipated is going to continue to weigh upon the economy.
It’s a bit ironic, because it’s hard to tell whether or not Wall Street is paying attention to the economy, or the liquidity issue. I suspect it’s liquidity, because that’s the only thing that has been important for the last 14 years. The stock market has long since abandoned the idea of being a measuring stick for the US economy, and instead measures the amount of liquidity that the Federal Reserve is giving Wall Street to gamble with.
The market will continue to be very volatile, but it certainly looks as if we have entered a leg down, and I believe at this point in time that you continue to fade rallies now that we are not only below the 50-Day EMA, but we are also below the 200-Day EMA. Because of this, then you need to look at this through the prism of a market that is a “fade the rally market”, especially as yields continue to rise in America. It’s amazing that the market is just now starting to believe the Federal Reserve, but here we are at this point looking at it trying to reprice the inflation picture going forward.
For a look at all of today’s economic events, check out our economic calendar.