Sentiment has been slightly optimistic Monday, mainly due to the absence of new negative news, pushing stocks somewhat higher during the EU session. Since US investors are celebrating a holiday, US markets will remain closed, resulting in low liquidity.
At the time of writing, the SP500 index traded near 3,700 USD, still firmly in a bearish grasp after June’s sell-off.
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According to a study from the Conference Board issued on Friday, the majority of chief executive officers and other C-suite leaders throughout the world predict their country will experience a recession by the end of 2023.
According to the business research organization, 60% of CEOs anticipate a decline in the economy in their main operating region during the next 12 to 18 months. About 15% of CEOs believe that their area has already entered a recession.
As per Yahoo Finance, a lot of projections on Wall Street were lowered downward as a result of the Fed’s larger-than-anticipated rate hike last week. As a result, Bank of America Global Research economists revised their projection for the US growth to almost zero, and the bank now estimates a 40% likelihood of a recession in 2023.
“Our worst fears around the Fed have been confirmed: they fell way behind the curve and are now playing a dangerous game of catch up,” analysts at Bank of America said in a note Friday.
The SP500’s drop, according to JPMorgan analysts, suggests an 85% likelihood of a recession. The SP500 index entered a bear market earlier this week (a 20% decline off its cycle highs).
Daily chart looks bearish
We can expect heavy selling in the 3,850 USD zone, where previous cycle lows are. Bears will surely be defending that level. However, if the SP500 jumps above it, the short-term outlook could change to bullish, possibly prompting a short squeeze rally toward 4,100 USD.
On the other hand, the support is now at last week’s lows near 3,635 USD and if not held, we could see a decline to 3,500 USD pretty quickly.