We're in the run up to the central bank bonanza again in the coming two weeks and that might make for a bit of a tricky trading period in the days ahead. US futures are holding higher today but it is just a bit of a reprieve after Friday's heavy selloff, which came after a stunning reversal from Thursday's US CPI data as noted here last week.
S&P 500 futures are up 30 points, or 0.8%, now but the general sense is that there is still some pushing and pulling with key technical levels in focus. Here's a look at the weekly chart for the cash market:
The 200-week moving average (blue line) is the contested level at the moment and last week's close came just below that. However, there is still an additional layer of defense for buyers around the 50.0 Fib retracement level at 3,505. Put together, that region is now the critical zone that will define equities sentiment as we look towards the key central bank meetings in the next two weeks.
Break below and the bearish trend and downside retreat is likely to accelerate further but if we do see price hold, there could be a case for a correction and re-evaluation of overall fundamental sentiment - which still hasn't really changed in the past two months. And given the latest set of inflation figures from the US and Europe, there is little reason to expect central banks to back down from their existing resolve in the weeks ahead.
In turn, equities can only cross their fingers and rely on hope. And in most cases, that doesn't turn out so well.