S&P 500: Despite Reversal, Still In Grip Of Bears

S&P 500 futures showed a strong recovery on Thursday after testing a low at 4029 with supportive economic data; after a steep fall for the last three trading sessions. Undoubtedly, the S&P 500 had seen the biggest percentage gain in a month, but the uptrend seems to be at the edge, due to growing inflation that could keep monetary policy in check.

The current bounce could once again see an acid test today with the announcement of retail sales data. Retail sales data is not the only parameter for testing the quantum of economic recovery. On Thursday, the Centers for Disease Control and Prevention (CDC) said it was easing its guidance for fully vaccinated people, saying they do not need to wear masks outdoors and can avoid wearing them indoors in most places. I feel that this is not the right time to conduct such a litmus test while the different mutants of Covid-19 are active in many parts of the world.

If retail sale rises 5% or more, then one could expect some more upside in a current pullback of S&P 500 futures to test the immediate resistance at 4141, otherwise an exhaustive move will follow the announcement. If the retail sales data comes below 2% or less than 1%, heavy selling in cyclical shares could follow. Once again, the big bears could hold a commanding position if the retail sales come on the weaker side. Finally, I conclude that if the retail sales remain near expectations that could only trigger a temporary rally in global equity markets.




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