Signs of upside rejection build ahead of PCE, earnings and month end

US equities and earnings season

It was a session of pure risk aversion overnight as US equities and yields fell.

The US dollar, gold, the Japanese yen, and Bitcoin all gained on weaker economic data and a return of banking jitters.

The share price of regional bank First Republic closed 49.38% lower at $8.10 after it reported deposits last quarter fell by 41% to $104.50 billion and said it is looking to offload $100 billion of long-dated mortgages and securities to help shore up what appears to be a sinking ship.

Elsewhere, General Motors, McDonald's, Visa, Alphabet, and Microsoft reported earnings beats. Post its report, Microsoft’s share price is trading 8.2% higher in after-hours trading at $298.00, supporting a higher re-opening for US equity futures this morning.

Core PCE

Turning to the economic data, the Conference Board’s Consumer Confidence index fell to 101.3 vs 104 exp, its lowest level since July 2022, reflecting that the backbone of the US economy, the consumer, is turning more cautious.

With just three trading sessions left before the end of the month, key US equity indices are now trading lower for the month, led by a 3.46% fall in the Nasdaq. The S&P 500 is down 0.92%, while the Dow Jones remains positive for April (+0.77%).

That said, a lot can happen in three sessions, especially with earnings set to drop from Amazon and Meta, previewed here. Also, set to drop on Friday the Fed’s preferred measure of inflation, Core PCE.

What is expected?

The Feds preferred measure of inflation, the Core PCE Price Index, is expected to rise by 4.6% in March.

A higher-than-expected number would all but seal the deal for a 25bp rate hike at the upcoming May FOMC meeting currently, 70% price for a 25bp rate hike. There is then 70bp of rate cuts price into the end of the year.

S&P 500 technical analysis

The S&P 500 is exhibiting signs of initial rejection from the top of the range 4200 area. We continue to look for a move lower towards 4000/3980 (200-day ma) before a retest of the bottom of the range at 3800 in the months ahead.

Aware that should the S&P 500 see a sustained break above 4200 (three daily closes above 4200), it would likely see the S&P 500 extend its rally to the August 4327 high with scope towards 4500.

S&P 500 daily chart

Nasdaq technical analysis

The Nasdaq has spent the month of April consolidating its strong run higher during the first quarter of 2023.

Overnight it tested important support highlighted at 12,800. If the Nasdaq were to see a sustained break of 12800, it likely signals that a deeper pullback towards 12,400 is underway with scope to the 200-day moving average at 12,100.

Aware that should the Nasdaq hold support at 12,900/12,800 and break above the recent 13,348 high, it would set up a retest of the August 13,740 high.

Nasdaq daily chart

Dow Jones technical analysis

After several unsuccessful attempts to break higher in Mid-April, the Dow Jones overnight coiled away from the downtrend resistance at 34,000/33,900 (from the bull market 36,952 high), providing the first signs of upside rejection.

While below 34,000ish, we expect the pullback to deepen towards the 200-day moving average at 32,650.

Aware that should the Dow Jones make a sustained break above 34,000 (three daily closes above 34,000), it opens a test of the 34,712 high from December 2022 with a scope to the 35,492 high from April 2022.

Dow Jones daily chart