E-mini S&P 500

E-mini S&P 500 (ES) Futures – Bulls Return to the Market as Fed Lowers Aggression

  • The Federal Reserve says it will remain flexible on rate hikes.
  • New unemployment benefit claims fell more than investors expected on Thursday, contributing to the move in the index.
  • Bulls are pushing the index back above 4000 on the charts.

The E-mini S&P 500 (ES) futures price closed Thursday’s trading session higher on a bullish candle. This move came after Fed minutes indicated that the central bank would remain flexible on rate hikes and might pause later in the year. Wall Street was up, and the three leading US indices experienced weekly gains last seen in mid-March. The index gained 79.11 points or 1.99%.

Reuters reported that BofA strategists said the Federal Reserve could pause its monetary policy tightening in September if there is economic deterioration and inflation slows down.

The number of Americans filing new claims for unemployment benefits on Thursday fell more than expected, showing tightness in the labor market. GDP data also confirmed that the economy contracted in the first quarter. Despite rising interest rates and difficult financial conditions, there is a strong demand for workers.

On the other hand, corporate profits across the board fell in the first quarter, showing the economic outlook could be uncertain. This erosion of profits could see workers lose jobs in the near term.

Brian Overby, a senior options analyst at Ally, said the Fed would be paying close attention to the jobs data, and an increase in unemployment could ultimately slow them down. This slowdown would favor stocks, hence the recent move.

A less aggressive Fed could mean a weaker dollar as it would lose its safe-haven appeal to investors. Today, investors will be keen on the PCE inflation data from the US.

E-mini S&P 500 (ES) futures technical forecast:

E-mini S&P 500 (ES) futures 4-hour chart
E-mini S&P 500 (ES) futures 4-hour chart

The 4-hour chart shows the price is trading below the 30-SMA, which has acted as resistance in the past. However, the price has broken the psychological hurdle of 4,000. Staying above the level will gain further traction.

In the meantime, the directional bias remains to the downside, and this could just be a short retracement before we see lower prices. The bulls can only take over if we can see the price above the 30-SMA and the RSI crosses the 50.0 level.