Mid-Week Technical Outlook: Indices

A sense of normality returned to financial markets on Wednesday after the utter chaos witnessed in the previous session.

The hotter-than-expected US inflation report detonated explosive levels of volatility across the board as fears intensified over the Fed triggering a recession to control inflation. US consumer prices rose 8.3% in the year to August, down from July’s 8.5% number but higher than the 8.1% market forecast. Traders have priced in the chance for a 75 basis point US rate hike in September and November following the smoking hot inflation figures. This development reinvigorated dollar bulls, sending the Dollar Index (DXY) back above 109.50 while gold prices smashed into the $1700 psychological support.

This afternoon our focus falls on the global equity space, especially US indices which remain highly sensitive to inflation data and Fed rate hike expectations.

S&P 500 smashes into support zone

The S&P 500 smashed into the 3945 level with the destructive force of a wreaking ball.  Prices cut through the 50-day and 100-day Simple Moving Averages, erasing three days of gains. It is safe to say that bears are back in control with a strong break below 3945 opening a path towards 3905. A strong decline below this point could open a path towards 3810. Further weakness below this point may trigger a selloff towards 3700.

Nasdaq wobbles above 12000

Just like the S&P 500, the Nasdaq tumbled like a house of cards yesterday. Prices created a heavily bearish candle on the daily charts with 12000 acting as a key point of interest. A solid breakdown below 12000 could open the doors towards 11500 and 11208, respectively. Should 12000 prove to be reliable support, an incline back towards 12300 and the 50/100 Simple Moving Averages.

FTSE 100 signals further downside

After cutting through the 50, 100, and 200-day Simple Moving Averages – bears could step into higher gear on the FTSE100. The trend is turning bearish with the recent break below 7300 suggesting a steeper decline towards 7150. If this level is unable to contain bears, prices have the potential to retest the 7000 level. Alternatively, a move back above 7300 could signal a rebound that takes prices back towards the 200-day SMA and 7400, respectively.

EURO STOXX 50 back within range

This index remains trapped within a range with resistance at 3650 and support around 3450. After prices failed to break above 3650, bears seized the driving seat – taking the Euro Stoxx 50 back towards 3550. Given how recession fears continue to gnaw at risk sentiment, this may cap gains across the equity space. The negative momentum may take prices back towards 3450 and 3400, respectively.

Nifty 50 pushes against resistance

The Nifty 50 remains bullish on the daily charts as there have been consistently higher highs and higher lows. The MACD is trading above zero with bulls currently eyeing the 18050-resistance level. A strong breakout above this point could encourage a further incline towards 18500. Should 18050 prove to be reliable resistance, a decline back towards 17700 and lower could be on the cards.

S&P 500 FTSE100 EUROstoxx Nifty Nasdaq 100 FED inflation