Inflation Data Changes Market Sentiment

<img src="https://fxopen.com/blog/en/content/images/2024/01/sp500-1.jpg" alt="Inflation Data Changes Market Sentiment" /><p>US CPI data published yesterday did not meet expectations. Analysts predicted 3.2%, but in fact it turned out = 3.4% (value a month ago = 3.1%). This hardly means a reversal of the large-scale trend toward weakening inflation (a year ago CPI = 6.5%), but to some extent investors have become wary. According to FedWatch, expectations for a rate cut by the Federal Reserve in March dropped to about 65% (before the news was about 70%).</p><figure><img src="https://fxopen.com/blog/en/content/images/2024/01/121–4-.png" alt="Inflation Data Changes Market Sentiment" loading="lazy" width="2000" height="1099" srcset="https://fxopen.com/blog/en/content/images/size/w600/2024/01/121–4-.png 600w, https://fxopen.com/blog/en/content/images/size/w1000/2024/01/121–4-.png 1000w, https://fxopen.com/blog/en/content/images/size/w1600/2024/01/121–4-.png 1600w, https://fxopen.com/blog/en/content/images/size/w2400/2024/01/121–4-.png 2400w" sizes="(min-width: 720px) 720px" /></figure><p>The publication of the news caused a noticeable surge in volatility in financial markets. Let&apos;s pay attention to the S&amp;P 500 chart. The index price is within an uptrend (as shown by the blue channel), however, this trend may change:</p><p>→ Tops A-B-C form divergence with the RSI indicator — a sign of weakening demand near the upper border of the channel.<br>→ Yesterday, the price only slightly and briefly exceeded the A-B-C formation, forming top D. That is, a false bullish breakout was formed. This type of price behavior at top D confirms the activity of the bears at the level of 4,800.</p><p>Formally, the upward trend is still in force, but 4,800 may become an important test of the bulls’ perseverance. One marker could be today&apos;s PPI data (to be published at 16:30 GMT+3), as well as reaction to earnings reports from major banks, including JPMorgan Chase, Citigroup, Bank of America and Wells Fargo.</p><p>If they turn out to be disappointing, it is possible that the S&amp;P 500 may fall to the lower border of the ascending channel.</p>