Futures on American stock indexes after a small morning surge moved into the red zone and are trading in the red. The strong bullish rebound that was observed last week is coming to an end. Traders can start taking profits today at the end of the month. The first positive week after an 8-week drop indicates an attempt to grope the market bottom. Dow Jones Industrial Average futures fell 204 points or 0.6%. Futures on the S&P 500 sank 0.6%, and futures on the Nasdaq 100 - 0.3%.
Yesterday, the US stock market had a day off due to the Memorial Day holiday. Today's data on the eurozone brought back the conversation that high global inflation will continue to put pressure on the growth rates of the economies of developed countries. In Europe, inflation reached a record level for the seventh month in a row, jumping immediately in May by 8.1% per annum. Data last week showed that in the US, the core price index of personal consumption expenditures - the Fed's preferred measure of inflation - rose by 4.9% in April compared with last year.
Although many politicians have already accepted that high inflation will lead to slower economic growth in the future, this does not mean that nothing will be done about it. The more prices rise, the more hawkish the Fed's policy will become.
At the end of last week, the Dow Jones index rose by 6.2%, breaking an eight-week losing streak. The S&P 500 gained 6.5% and the Nasdaq jumped 6.8%.
Many traders are now trying to understand whether the rebound is the bottom, and how the market will react to new negative fundamental data indicating a deterioration in the economic situation. It is expected that despite the sharp rebound upward, it is unlikely that this will be a real turning point for the market. From quarterly reports earlier this week, Salesforce, HP, and Victoria's Secret are expected.
As for the technical picture of the S&P 500
If the bulls continue to act more aggressively and do not let the trading instrument below $ 4,122 at the very beginning of this week, the nearest target will be the resistance of $ 4,157, an attempt to break through which has already been made today. However, the end of this month and the beginning of next may make some adjustments to the market - especially in the observed bullish trend. A break of $ 4,157 will push the new active movement of the trading instrument up to the area of $ 4,197 and $ 4,234. In case of pessimism and regular talk about high inflation and the need to fight it against the background of speeches by representatives of the Federal Reserve System with statements about more aggressive steps by the Fed, as well as the absence of bulls at $ 4,122, we will see major profit-taking and a sell-off to $ 4,089. A decrease in the trading instrument under this level will quickly push it to new lows in the area of $ 4,050 and $ 4,013, and the further target will be the area of $ 3,975.