US equities were battered yesterday in volatile trading with the S&P 500 finishing the day over 2% lower. The move came despite the dollar slipping as one can argue that month-end and quarter-end flows may be a factor. But as always, the technicals will be the best way to get a grip on things and here is how the chart is looking for now:
The index briefly hit its lowest levels since November 2020 yesterday but the close was salvaged, coming just above the June low this year. That remains the key support level to watch at the moment alongside the 200-week moving average (blue line) at around 3,589. If those levels break, the next key technical spot to watch will be the 50.0 Fib retracement level at 3,505.
But essentially, if we do see price fall further from here, it would signal the next downside leg for equities and that won’t bode well – particularly when the fundamental backdrop continues to stay rather challenging.
The Fed remains as hawkish as ever and despite BOE intervention, bond yields are likely to track higher as global inflation pressures are also showing little signs of abating – at least in a meaningful and significant manner. The former remains the most critical factor at this juncture and amid heightened recession risks, there is little for equity bulls to work with for the time being.