The litmus test for broader markets this week was supposed to be the US CPI data on Tuesday. After that failed to provide market players with much to work with, all the attention turned to the US retail sales data yesterday instead. There was a bit of angst early on that the numbers would come in hot and equities were pinned lower. But by the end of the day, it was clear that it isn't going to be that easy to break the resolve of dip buyers in stocks at the moment.
After the price action yesterday, it has been twice now that US equities encountered an early setback from the data to open lower (red circle). But come the end of the day, it has recovered well (green circle) with Tuesday's close coming in flat and yesterday enough to squeeze out gains in the S&P 500.
That's a win on all accounts on the part of dip buyers in my view.
Looking at the bigger picture:
The fact that price is continuing to keep above the 4,100 mark this week is encouraging as the upside run looks to consolidate at the highs despite being challenged by key economic data releases - which in all honesty, could have been a trigger for a move lower in stocks.
That will see buyers target the 2 February high at 4,195 for a potential break higher, with the next upside leg possibly looking at resistance from the 28 April and 16 August highs at 4,308-25.
If I were to put it in a phrase, it would be a case of bend but don't break for equities sentiment so far this week.
