Stock prices rallied on CPI number yesterday, but will the uptrend continue?

The S&P 500 index gained 1.91% on Tuesday, as investors reacted to the lower-than-expected Consumer Price Index release. It reached a new local high of 4,508.67 and it was the highest since mid-September. Recently the index broke above the resistance level marked by the technically important September 21 daily gap down of around 4,376-4,401. Stocks rallied despite uncertainty about monetary policy, economic growth, and geopolitics. The market resumed its rally from October 27 local low of 4,103.78.

Stocks will likely open 0.3% higher this morning following lower-than-expected PPI release and higher-than-expected Retail Sales, and Empire State Manufacturing Index releases. The S&P 500 is now close to the 4,500 level as we can see on the daily chart:

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Futures Contract Trades Above 4,500

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market accelerated the rally and it broke above the 4,500 level yesterday. The resistance level is now at around 4,550-4,570, marked by the previous local high. On the other hand, the support level is at 4,480-4,500.

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Conclusion

The S&P 500 index has further accelerated its uptrend on positive economic data, weakening the U.S. dollar. There have been no confirmed negative signals so far. However, there are short-term overbought conditions that may lead to consolidation or a correction at some point.

Here’s the breakdown:

• The S&P 500 trades along the 4,500 level following yesterday’s CPI release.
• There may be a consolidation or downward correction at some point.
• In my opinion, the short-term outlook is still bullish.

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