SP500 Tests 200-day Average

US Macro update

The number of Americans applying for benefits for the first time dropped from a downwardly revised 252,000 (was initially 262,000) to 250,000 in the most recent week, significantly below the consensus estimate of 264,000, after reaching the highest level since November.

On the other hand, continuing claims rose from 1.43 million to 1.437 million, reaching four-month highs.

Meanwhile, the Philadelphia Fed Manufacturing Survey improved notably in August, printing 6.2, way above -12.3 in July and -5 predicted by economists.

Earlier today, the president of China, Xi Jinping, stated that China would continue to open up its economy, which somewhat increased the market risk appetite.

As investors placed bets that the Fed will reconsider its aggressive pace of rate hikes in light of July’s lower inflation reading, stocks had risen recently. The Nasdaq 100 had taken the lead in the gain amid relief at the possibility of looser policy, supported by ferocious CTA buying, stock buybacks, the return of retail investors, and hedge funds obliged to chase higher due to FOMO.

“The relative valuation of most of those Nasdaq stocks compared to other stocks around the world has become extreme again, and positioning has become quite extreme again, and so I wouldn’t be surprised to see that rolling over into the end of the summer,” said Freddie Lait, chief investment officer at Latitude Investment Management.

200DMA resistance

If the index climbs above the 200-day moving average, currently near 4,310 USD (the purple line), the long-term trend could change back to bullish, despite the worsening fundamental situation.

On the downside, the support seems to be at the steep uptrend line near 4,275 USD before the key demand zone of previous lows and highs at around 4,200 USD.