On Wednesday the S&P 500 briefly broke below 4,240 to test support at the lower end of an upward-sloping trend channel that has been building since last October’s low. This took the index back to its lowest level since the early summer and had many traders expecting an extended decline.
But it snapped back and in early trade on Friday the S&P had added just under 100 points from Wednesday’s low helped by some better-than-expected US inflation data.
Core PCE for August rose 3.9% year-on-year, as expected, but down from the prior reading of +4.2%. This countered the unexpected increase in the CPI readings seen just over a fortnight ago, which appeared to trigger the S&P’s sell-off from over 4,500.
Ahead of this week’s rally, the S&P was on course for a September loss of 4.6%, while the tech-heavy NASDAQ 100 was 6% lower. So the positive rejection of support over the last few trading sessions has been a welcome respite for the bulls, if not the bears.
But it’s probably too early for the bulls to declare victory. We may see a positive session to end the month and quarter, but there’s still the danger this weekend of a US government shutdown, which, even if short-lived, could be the catalyst for another pull-back. If deep enough, we could see another test of downside support.
But it snapped back and in early trade on Friday the S&P had added just under 100 points from Wednesday’s low helped by some better-than-expected US inflation data.
Core PCE for August rose 3.9% year-on-year, as expected, but down from the prior reading of +4.2%. This countered the unexpected increase in the CPI readings seen just over a fortnight ago, which appeared to trigger the S&P’s sell-off from over 4,500.
Ahead of this week’s rally, the S&P was on course for a September loss of 4.6%, while the tech-heavy NASDAQ 100 was 6% lower. So the positive rejection of support over the last few trading sessions has been a welcome respite for the bulls, if not the bears.
But it’s probably too early for the bulls to declare victory. We may see a positive session to end the month and quarter, but there’s still the danger this weekend of a US government shutdown, which, even if short-lived, could be the catalyst for another pull-back. If deep enough, we could see another test of downside support.