Image source: 123kikovic © 123RF.com
The main economic event for this week is undoubtedly going to be the release of the newest data regarding the consumer confidence index in the United States.
Analysts and market experts are keen on examining the most recent changes (if any) to the index following the observed robust performance of the manufacturing PMI data from last week.
You can read more about the importance of the evidently strengthening US industry for the local growth here.
The recently observed improvement of the economic conditions in the US is expected to stimulate a positive revision in consumer confidence, which, in turn, is an essential indicator for the broader economy’s well-being.
If the value of the index does indeed increase on Tuesday, that would have a predominantly positive impact on US growth and the observed price stability as well.
That is so because, as the consumer sentiment becomes increasingly potent, the overall spending rate is also likely to improve as a consequence, and the final result would be heightened business activity.
US Consumer Confidence. Image source: TradingEconomics.com
The prevailing consumer confidence had surprisingly fallen in August, which marked a tumble of nearly ten index points and the year's biggest disappointment.
Despite the troublesome beginning to Q2, the consumers’ confidence has been steadily improving since then, and the index is currently enjoying a streak of four consecutive months of sustained growth.
If the consensus forecasts are met on Tuesday and the index is shown to have strengthened over the last month, it means that it would get back near to its pre-August value.
Robust consumer sentiment is a harbinger of price stability, which, in turn, drives inflation close to the FED’s symmetric target level at 2 per cent.
It can, therefore, be seen how Tuesday's data would be of crucial importance for the future development of the US monetary policy.
It would also likely be closely scrutinised by market analysts for its overall importance to the stock market and more precisely, whether the booming consumer confidence would support the recent hike in this particular market.
Last week the S&P 500 surged to 3127 basis points, which was an all-time high for the index. However, investors are keen to understand how far could the bullish trend be extended before a price correction occurs.
Currently, the price of the SPX is forming the 5th wave in a classic Elliott wave pattern, and the RSI indicator demonstrates that the price is already becoming overbought.
Thus, a potentially disappointing consumer confidence data on Tuesday could initiate the beginning of such a short-term corrective momentum in the index's price.
SPX 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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