E-mini S&P 500

E-mini S&P 500 (ES) Futures: Bears Return Ahead of Jerome Powell’s Testimony

  • The best day on Wall Street ended today as markets turned lower on recession fears.
  • Investors are unsure whether inflation has peaked.
  • US President Joe Biden is expected to call for temporary tax relief on gasoline.

E-mini S&P 500 (ES) futures rose overnight as investors hoped the economic outlook would not be as bad as previously thought. This sentiment did not last as the index pushed lower on Wednesday. A dark cloud is hanging over Wall Street on Wednesday as the bear market returns. Recession worries are fueling this move as central banks continue to raise interest rates.

“I think that this recent post-holiday bear market rally is a reflection of the uncertainty that investors have regarding whether we have seen the peak of inflation and Fed hawkishness or not—I think we’re close,” said David Chao, Invesco global market strategist for the Asia Pacific.

He went on to say that the equity market might end the year higher than the current price levels, but volatility would remain until it was clear the Fed would not push the US into a recession.

Fed Chair Jerome Powell is expected to start his testimony later today, and investors will look for policy clues at the next FOMC meeting.

US President Joe Biden is expected to call for temporary tax relief on gasoline. This news has seen oil prices push lower.

“The commodity market seems to be calling for a (global) recession, and the dollar is pivoting to strength as a haven,” said Saxo Bank FX strategist John Hardy.

The S&P 500 futures’ downside potential remains high amid this global tension, and prices could go below 3600.00.

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

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

Looking at the 4-hour chart, we see the price below the 30-SMA after a failed attempt to trade above it. ES is currently trading above 3700.00 and indicates that bears are still in control. The RSI is also trading below 50, favoring a bearish momentum. The target for bears would be 3650.00, which is a strong horizontal support level.

This trend will only change if bulls can push the price above the 30-SMA and the RSI trades above 50. On the upside, the strong resistance lever appears at 3780.