Wall Street futures flat ahead of key US data; S&P techs still bullish

The S&P 500 future is pointing to a flat open on Wall Street today, following on the uninspiring sessions in Europe and Asia Pacific overnight. So far today we haven’t had any major market-moving news or data to encourage the market participants to establish any bald positions. But that could change later on with the release of some important US macroeconomic pointers. Still, with the FOMC meeting coming up next week, the markets may quickly brush off any surprises. Retail sales are expected to have bounced back 0.3% in August after a flat July. Core sales are likewise seen improving a touch. The outcome of the UoM consumer sentiment survey is expected to show some improvement to 83.2 at the start of this month from 82.5 previously. And business inventories are estimated to have risen 0.5% in July, up from 0.4% the month before.

Meanwhile the technical outlook for the S&P remains bullish, as things stand. Last week, the index rallied to a fresh all-time high of 2012 before slowly pulling back from there due to the lack of any supportive fundamental stimulus. But the selling has, for now at least, stalled around the resistance-turned-support level of 1985 which is a bullish development in my view. For as long as the buyers manage to hold their ground here on a daily closing basis, the path of least resistance would remain to the upside. Today, they will need to push the index above resistance and psychological level of 2000 in order to encourage fresh buying at these elevated levels, especially with the weekend fast approaching. Failure to do so could lead to further profit-taking later in the afternoon. If and when last week’s record high is breached, the bulls may then target 2018 and possibly even 2051. These levels correspond with the 127.2 and 161.8 percent Fibonacci extension points of the corrective move we saw from July to August (i.e. the move from point A to B on the chart).

O the bears will be hoping to see the S&P break the 1985 support level, preferably on a closing basis. If they do, a move down to the 50- or even the 100-day moving averages, at 1972 and 1946, could be on the cards soon. Traders will also want to watch some of the Fibonacci levels (of the BC rally) for support, especially the 38.2 and 61.8 percent levels at 1967 and 1940 respectively. They would be encouraged by the fact that the bullish momentum appears to be fading a touch: the RSI, for example, has failed to create a higher high like the underlying index which suggests the momentum may be shifting in the bears’ favour.