S&P 500 Analysis: Concerning Market Behaviour

On Friday, data was released showing that inflation in the US slowed down in May. According to ForexFactory, the actual monthly Core PCE Price Index was 0.1%, which matched the forecasts (last month’s PCE was 0.3%).

Reuters reports that:
→ Prices for recreational goods, as well as for vehicles, furniture, and durable household appliances, dropped significantly.
→ This news reinforced expectations that the Federal Reserve might begin to cut interest rates later this year. According to the CME FedWatch tool, market prices now indicate a 63% probability of a Fed rate cut in September, compared to a 55% probability a month ago.

Monetary policy easing should be perceived as bullish news for the market, however… While the S&P 500 index (US SPX 500 mini on FXOpen) initially rose in the hours following the publication, it dropped to the week's lows by the end of trading. This bearish market behaviour amidst positive news of slowing inflation is concerning.

Today, the price of the S&P 500 (US SPX 500 mini on FXOpen) shows that bulls are trying to recover from Friday's decline. They might be aiming to resume the upward trend that has been in place in 2024.

How successful could this be?

According to the technical analysis of the S&P 500 (US SPX 500 mini on FXOpen) chart:
→ The price action is forming a fan of supports (shown with blue lines) that are sequentially being broken from top to bottom. This is a sign of weakening demand.
→ On Friday, the price slightly surpassed the historical high (indicated with an arrow) but then sharply plummeted. Another bearish sign.

Currently, the price of the S&P 500 (US SPX 500 mini on FXOpen) is within the range of 5454-5520, which can be interpreted as bulls being exhausted while bears are not yet ready to push the price down. If the former do not find a fundamental incentive, it may lead to the latter taking the initiative.

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