BREAKING: US500 deepens losses after FED’s Daly comments

All major Wall Street indices continue to move lower as traders remain concerned about the global economic slowdown as central banks around the world moved aggressively to rein on inflation, while latest disappointing US PMI surveys indicate that the world's largest economy is heading into recession. 

Due to sour moods US500 plunged 1.5% on Friday, extending recent losses. On Wednesday buyers failed to break above long term downward trendline and index pulled back sharply to psychological resistance at 4,000 pts following Fed Chair Powell press conference. Yesterday's hawkish remarks from ECB president Lagarde provided fuel for the bears and sentiment worsened further today following FED's Daly comments. Central banker said that policymakers anticipate a slowdown, but they still have a long way to go. He pointed out that core services inflation, excluding housing, remains quite high. The same can be said about house price inflation, while it usually takes a lot longer for that kind of labor-market inflation to subside. In his opinion the labour market is off balance which has an impact on core service inflation and FED needs to raise unemployment-4% or higher. Most importantly Daly said that his inflation projection has increased.

If current sentiment prevails, US500 may be heading towards major support at 3800 pts , which coincides with 38.2% Fibonacci retracement of the last upward wave started March 2020. Should break lower occur, downward move may deepen towards 3600 pts or even 3500 pts area which is marked with the lower limit of the 1:1 structure and October lows. It seems that only a break above the aforementioned trendline, would lead to a shift in market sentiment to more bullish.

US500, D1 interval. Source: xStation5