On Tuesday, US stock index futures rose after a tough last week's sessions, where investors once again lost a huge amount of money due to a more aggressive Federal Reserve policy and an increasing threat of recession. Dow Jones Industrial Average futures jumped by 1.67% or 500 pips. S&P 500 futures increased by 1.9% and Nasdaq 100 futures soared by 2%. Yesterday, the markets were closed.
Despite the robust bounce, many analysts see no real reason for the stock to rise, and it's hard to disagree with them. The vast majority believe that the rise is nothing more than a dead cat bounce. In the future, the pressure on indexes will return after bulls showed almost no activity near a major resistance of $3,762. We will describe the technical picture in more detail below.
A small correction in commodity markets helped cool down some of the panics among investors, who have seen the signs of a recession. Oil is trading above $100 a barrel and supply chain problems are likely to continue pushing the US economy into recession, dragging prices to new highs. US Treasury Secretary Janet Yellen has covered this point recently: "We saw during the pandemic that our supply chains were very brittle and really lacking in resilience." Yellen repeated her support for so-called friend-shoring, saying "countries that espouse a common set of values about international trade and conduct in the global economy should trade and get the benefits of trade so we have multiple sources of supply."
It was reported last week that US President Joe Biden is going to visit Saudi Arabia to discuss energy production. If commodities continue to decline, it may eliminate huge pressure on stock markets. Brent crude futures increased by 1.4% to $115.75 a barrel. The US oil benchmark West Texas Intermediate added 2.2% to $110.41 a barrel.
Tomorrow, Fed Chairman Jerome Powell will address the US Congress. We will see what words he will find to justify such an aggressive monetary policy and how the markets will react to it. Obviously, investors' optimism will remain intact after tomorrow's speech. Today, traders are watching existing home sales.
The technical picture of the S&P 500
As I noted above, a sharp upward rebound will allow investors to calm down a bit, but it is unlikely that the level of $3,643 will be the low and the bottom that everyone is counting on. Today, buyers of risky assets can count on a return to the resistance of $3,762. A breakthrough of this level may push the asset to the area of $3,788, where large sellers will come back to the market. At least, there will be those, who wish to lock in profits on long positions. The next target is located at the level of $3,826, but it is unlikely to occur. In case of pessimism and another talk about high inflation and the need to curb it amid speeches of representatives of the Fed stating about more aggressive steps, the trading instrument may reach new support at $3,731. A breakthrough of this level may trigger a new sell-off at $3,708 and $3,677.
