S&P 500 futures fail at 4,000 as market downtrend looms
The Federal Reserve has already raised rates three times this year and is expected to do so again on Wednesday July 27th.
But with the economy showing signs of a significant slowdown, there are rumors that the Fed may not raise rates as much as expected.
The current downtrend that started in April has returned to the Fibonacci ratio of 100%.
The key level to watch on the upside is if the market breaks through resistance at 4000. Above that, resistance remains at 4120.
The key level to watch on the downside is a break below 3,850, indicating a retest of past lows.
We are clearly in a stagflationary environment, as evidenced by reports from Walmart and several other retailers.
With US inflation at its highest level in 40 years and food price inflation soaring, Americans are spending more on basic necessities.
As for the recession, it is still too early to tell. Economists and politicians have different views on data and metrics. The debate over whether or not the US is in a recession and how many rate hikes are to come lies in the data that will be released in the coming months.
What do our proprietary indicators say?
Some of the answers to these questions will come from the current earnings season, when companies report in the second quarter.
In addition, various following economic reports will provide insight into the state of the economy.
Several of our indicators point to an absence of risk.
Our “real movement” momentum indicators have highly predictive power by being able to anticipate downturns. The momentum is dragging the market down as you can see above.
Investors should be prepared for a potential pullback.
What lies ahead is the question on everyone’s mind right now, but in my view, inflation and slow growth will continue to be a part of our lives for much longer than the Fed expects.
Economic growth continues to decline and the pace of decline is expected to accelerate.
Overall, the market is in a trading range and the trend is still down.
Another question for investors is whether current levels hold, will this be a false rally or the start of a true recovery.
The answer will have important implications for asset allocation and portfolio construction.
Click here to learn more about the real movement and other Marketgauge indicators
Analysis and summary of ETF trading:
S&P 500 (SPY) 403 big resistance and today we saw how essential the 390 support is
Russell 2000 (IWM) 176.50 support to keep and must now withdraw 182.50
Dow Jones Industrials (DIA) 322-323 resistance 316 support
Nasdaq (QQQ) 308 large strength 293 support key
KRE (Regional banks) Support for 60 keys
SMH (Semiconductors) 221 support 230 resistance –
IYT (Transportation) Second weakest Modern Family Sector as it fell below 50-DMA
IBB (Biotechnology) support 120
XRT (retail) Weakest modern family sector – now back under 200-WMA key at 60.92
The author may have a position in the titles mentioned at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.