Data released on Thursday, showed the US economy grew at a 6.9% annualized rate in the fourth quarter, surpassing gexpectetions. According to analysts at Wells Fargo, the details behind the better-than-expected headline point to a slowing in spending and a back-up in inventories. Without the boost from inventories, GDP would have been just 2.0% in Q4, they explained.

The collapse in the S&P 500 has extended to the 38.2% retracement of the rally from October 2020 at 4213 and the aggressive turnaround higher has seen a near-term bullish reversal pattern complete. Strategists at Credit Suisse look for a consolidation phase into the FOMC on Wednesday, but with 4430/4450 ideally capping. We look for a consolidation/recovery phase to emerge prior to the FOMC this Wednesday. We thus look for a test of resistance at 4430/50 – the key 200-day average and 38.2% Fibonacci retracement of the January collapse – but with our bias for this to cap for a phase of consolidation, ahead of a retest of 4213/4164.

Whilst we will look for evidence of a floor at 4213/4164 again, should weakness extend we would see scope for further weakness to 4057, potentially 3855/15.”

A close above 4450 would be seen to mark a further stabilization, with resistance then seen next at 4477 ahead of 4495.”

VIX continues to surge higher and we look for a test of 41.16/36 – the October 2020 high and 38.2% retracement of the 2020/2021 fall. Beyond here, and we would then see scope for a move to 50.

SP500 Decides For a Hawkish Correction

Jan 27 2022