S&P 500 (SPX) eyes another test of 4,000 as China bulls markets up
- China looks to lessen some restrictions and engage with protestors.
- Hang Seng spikes, closing over 5% higher on Tuesday.
- US Dollar falls, oil spikes on reopening hopes.
The S&P 500 fell yesterday on fears over China protests and reduced hopes for the great China reopening story. China and oil sensitive areas fared the worst with (XLE) Energy and (XOP) Oil & Gas Producers the worst sectors along with semiconductors. Consumer staples continue to outperform as they fell only 0.4%.
S&P 500 news
Tuesday brings a turnaround as China looks like it could be reopening again. This trade is like a revolving door, but news that China will relax some restrictions including vaccines for the elderly and engaging with the protestors has once again reignited China bulls. The Hang Seng spiked over 5%, and Oil rallied sharply. The US Dollar naturally slid. Thus far the reaction in Europe is more muted as we await German inflation data later Tuesday. The data from the regions looks promising with inflation falling more than expected in Germany's most populous state. Spanish inflation data also surprised to the downside. This is not hitting the Euro much in subdued trade as markets remain unsure of the next move. Overnight Fed hawks Bullard to Mester rang their alarm bells, but the market largely ignored the expected hawkish comments. Powell tomorrow may garner more attention.
S&P 500 (SPX) forecast
There is a lot of push/pull at current levels. The latest option data from Tier1 Alpha looks like SPX feels resistance at 4,100, and given the tight ranges market makers are having a dominant role at present. China news is likely to see the market open higher, and it remains to be seen if this move can continue. Oil being higher is one slight problem as are continued woes over Apple and Foxconn in China. The sentiment remains upbeat, however, and with 3,946 being held we can once again look for consolidation around 4,000. Again ranges are likely to remain tight, but a test of the 200-day moving average looks like the most likely outcome at 4,056. A break there, and an extended move to 4,218 is more likely as it represents the gap from August.
SPX daily chart
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Author
Ivan Brian
FXStreet
Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.
