A slump in US retail sales, as well as the risk-off sentiment from US-China tensions, is putting pressure on the S&P 500 this Friday. The S&P 500 is trading 0.96% lower as the index looks set to kick off another session in the red.
Further pressure was placed on the US markets after the US Commerce Department hinted that any chipsets and semiconductors made with US technology would not be sold to Chinese company Huawei, in what many see as a further escalation of US-China trade tensions. Several negative remarks about US-China trade have started to emanate from the US side following repeated accusations alleging China’s culpability in the coronavirus pandemic.
Very disappointing retail sales data also compounded the woes of investors. Retail Sales and the core component of the report came in at -16.4% (consensus -12.0%) and -17.2% (consensus of -8.6%) respectively. The retail sales report showed just how much consumer spending had dropped off in the US. Extended business shutdowns also contributed to the dismal data.
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The S&P 500 is trading at 2826.5, after attempts at price advance at the start of the session were beaten back at the 2844.3 resistance. The candles of Wednesday and Thursday form a piercing pattern, which is supposed to end in a bullish move. However, the 2844.3 resistance seems to be resisting this move. Additionally, the fundamentals of the day are headwinds the S&P 500 have to contend with.
If the candle of the day can break the 2844.3 resistance to the upside, this would fulfil the technical expectations of the piercing pattern and open the door for a retest of the resistance zone where point D of the harmonic crab pattern lies.
Further resistance targets are located at 3137.0 and 3257.5 (88.6% Fibonacci level). However, only a break of the 2961.4 and 3028.3 price levels which border the resistance zone, will make the attainment of the higher resistance targets a reality.
On the flip side, if 2844.3 remains too strong and rejects the attempts at price advance, then we could see a pullback towards 2796.9 (50% retracement) and possibly 2707.7 (11 March 2020 lows).