June E-mini S&P 500 Index futures are trading sharply lower late in the session on Friday in a move that threatens to take out the low of the year. Sellers are being motivated to liquidate shares by a plunge in Amazon, following a gloomy quarterly report, and the biggest jump in monthly inflation since 2005. Ahead of Friday’s sell-off, gains were already being capped by worries over rising interest rates.

At 16:03 GMT, June E-mini S&P 500 Index futures are at 4122.75, down 160.75 or -3.75%. Meanwhile, the S&P 500 Trust ETF (SPY) settled at $412.04, down $15.77 or -3.69%.

All 11 S&P 500 sector indexes fell, led by a 5.9% slide in Consumer Discretionary and a 4.9% drop in Real Estate. Additionally, the S&P 500 logged its largest one-day decline since June 2020.

In economic news, data showed the personal consumption expenditures price index – the Fed’s favored measure of inflation – shot up 0.9% in March after climbing 0.5% in February.

Daily June E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. Reaffirming the downtrend was the failure to hold this week’s previous low at 4136.75 and the March 15 main bottom at 4129.50. A trade through 4509.00 will change the main trend to up.

The minor trend is also down. A trade through 4303.50 will change the minor trend to up. This will also shift momentum to the upside.

Short-Term Outlook

Buyers keep trying to find value on the charts, but haven’t been able to identify the key area that could stop the price slide. Making the task difficult is the prospect of rising interest rates.

Investors could easily find value when they were aggressively buying the dips when interest rates were trading near zero percent. Now they have to figure out where value exists in an environment that faces a 50-basis point rate hike by the Fed in May and talk of similar moves in June and July. Furthermore, after these aggressive rate hikes, the central bank is likely to raise rates 25-basis point at each meeting until the end of the year.

On top of rising rates, investors are dealing with a first quarter contraction in the economy and surging inflation.

The index is nearing key levels on the chart not seen in over a year. But again those previous bottoms were made when rates were near zero percent, reducing the odds that they will hold a second time. We expect investors to continue to sell the rallies until they can figure out how aggressive the Fed will be, if the economy is truly contracting and if inflation can be tamed. There are just too many negatives hitting the market to be bullish at this time, even if prices appear to be relatively cheap.