US equity averages threaten deeper corrections

Intermediate
  • US equity averages have taken a lead on the downside this week, with the previously more vulnerable European equity indices having taken global markets lower in latter March, during the current correction phase.
  • The European equity average selloff has more recently been driven by slowing economic data, of note being last Friday’s (22nd March) German Manufacturing PMI data.
  • The US equity vulnerability since last week has primarily been due to concerns regarding plunging US Treasury (UST) yields, with the 3 month-10yr section of the UST yield curve (YC) having inverted.
  • The inversion of this segment of the UST YC has previously been a precursor to a recession in coming years.
  • Our focus today is on the broad US benchmark average, the S&P 500.

S&P 500 (E-Mini) downside correction theme resumes

A failure back lower as we had expected for Wednesday through 2809.25 support, having been capped by 2835.0 resistance ahead of the 2843.5 barrier, resuming the negative tone from Monday’s prod lower after last Friday’s plunge through important 2813.75 support, to keep risks to the downside for Thursday.

The late January push above 2690.5 shifted the intermediate-term outlook to bullish, BUT concerns are growing for an intermediate-term shift back to neutral below 2726.5.

For Today:

  • We see a downside bias for 2789.5/88.25; break here aims for 2771.0, maybe 2755.5.
  • But above 2816.25 opens risk up to 2835.0, maybe 2843.5.

Intermediate-term Outlook – Upside Risks: We see an upside risk for 2955.5/61.25 and 3000.0

  • What Changes This? Below 2726.5 shifts the outlook back to neutral; through 2686.0 is needed for a bear theme.

4 Hour Chart

SP500 Chart

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