S&P 500 (SPX) steady, but pressure remains

S&P 500 declines on rising yields from strong ISM.
Oil price collapse hits energy sector hardest.
FOMC next week is likely to result in hesitant trading.

Ivan Brian FXStreet

Oil stocks took a hammering on Monday as oil fell off a cliff, and overall equity sentiment was weak to begin with. XLE closed down 3%, while XOP was down 4% (oil and gas explorers). Defensive names outperformed, and not surprisingly JETS also held up due to falling oil prices.

S&P 500 (SPX) news

Expect more choppy trading with little clear direction before next week's FOMC. Investors are largely dawning on the reality that the dot plot is likely to be shifted upwards. Something the Fed has been saying ad nauseam for the past few months. However, rightly so that the Fed's credibility is shot, so their actions speak louder than words. Already the RBA has hiked and erred on the hawkish side. On Wednesday we will see how the BOC performs. Oil prices and a calming of yields could see equities recover modestly on Tuesday, but any large gains are unlikely. The Goldman Sachs Financials conference kicks off Tuesday, so keep an eye out for comments on outlook, etc.

S&P 500 (SPX) forecast

So far there has been a failure to break channel resistance, and now the SPX targets the 3,946 to 4,031 range. This is the base case before next week's FOMC. The RSI remains in neutral with little signaling.

SPX daily chart

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.

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