SP500 advances above 50-day average & short-term downtrend line

Thursday brought massive buying to equity markets, pushing the SP500 index 1.5% higher. More importantly, it managed to rise above the recent bearish trend line. At the same time, it also jumped above the 50-day moving average, eliminating the immediate bearish threat from the technical analysis point of view.

US macro data in focus today

Later in the day, the New York Empire State Manufacturing Index for October will be published, and it is expected to weaken modestly, from 34.3 to 27.

However, investors will pay more attention to the US retail sales for September . They expect a moderate slowdown in retail sales to -0.2% from 0.7% previously. At the same time, the ex-autos gauge is seen weakening to 0.5% from 1.8% in August . Weaker numbers could be slightly bullish for stocks, although it looks like the Fed won’t alter its hawkish stance anyway.

Lastly, the Michigan consumer confidence sentiment index is due , likely increasing to 73.1 from 72.8. However, rising prices and the recent stumble in the stock markets could lead to a negative surprise.

From other news, the investment bank UBS sees only a modest impact on growth and inflation from the current increase in energy prices.

Our base case is that while growth rates may have peaked, growth will remain robust in the coming quarters while inflation recedes from this year’s spike. We continue to see equity upside and recommend buying the winners from global growth, including energy and financials, the bank’s economists said in a note.

Investors now expect the Fed to start tapering in November and finish the process in July 2022. Additionally, the first rate hike will likely happen by September 2022, and another rate hike should happen soon after.

Daily chart starting to look bullish again

As previously mentioned, the SP500 index managed to get beyond some important resistances this week. As a result, the daily chart looks positive again, with the medium-term uptrend likely being renewed.

As long as it remains above the 50-day average, currently near 4,440 USD, the short-term outlook seems bullish , but that support must be defended. Otherwise, we could see a decline toward 4,400 USD, with a possible retest of the broken, bearish trend line (at the moment, it stands at around 4,380 USD).

The next target for bulls will likely be at previous highs near 4,485 USD . Should it close above it on a daily chart, we might see a retest of all-time highs pretty quickly in that case.

SP500 daily chart, Source: Author´s analysis, tradingview.com