The BMV index has had 2 positive days despite major US stock indices posting losses over the same period.

Today we saw various economic data published from the US, with PPI, Retail Sales and Jobless Claims. The major surprise came from the PPI number, which doubled forecasts of 0.3% with a print at 0.6%.

Retail sales was sales was positive but less than expected, while Jobless Claims showed a stronger than expected job market. Overall, the general sentiment was mixed with a particular concern for the higher-than-expected PPI.

The conundrum is simple, the Fed wants to bring interest rates down, but too early may be detrimental. At the same time, the central bank needs to protect employment, with the recent strong numbers that aspect seems satisfied.

So now we get the sensation the Fed might not be in too much of a hurry if price increases don’t fall back inline. Recent inflation data also gave a small but positive surprise higher. Today’s number in theory isn’t taken into consideration by the Fed, but they must be watching.

Next Thursday 21, Banxico will hold its scheduled monetary policy meeting. Various members have stated that there is room for a cut in interest rates. As early as yesterday, Wednesday 13, the Deputy Governor Omar Mejia said that he say room for a rate cut already at the next meeting on the 21^st.

So, we can see where the bullish sentiment is coming from. However, will it last once the fact has happened. We all know the saying buy on the rumor, sell on the fact.

Technical View

The BMV index has rebounded from a support level over the past two session gaining 2.4% and 1.7% in Wednesday’s session alone. From the day chart below we can see the support line (black line) is given by two significant turning points. In fact, the rebound even happened before the market touched that level.

The market is currently in the Ichimoku cloud and will find resistance at the top of the cloud. To consider a bull trend is back in place we would need to see price break above the cloud. The resistance at the top of the cloud is strengthened further by a level reached also back in April 2022.

That peak at 57064 then led to a drop of nearly 22%. A significant drop, which has been beaten twice already with the two previous peaks in December 2023 and February 2024. However, this time the 57064 level coincides with the top of the Ichimoku cloud.

The appearance of the Ichimoku cloud on the chart adds a significant amount of resistance at the 57064 level when combined with the previous peak from April 2022. It will be particularly interesting to see what happens next week.

Once Banxico takes its action and implements what seems a very likely interest rate cut, will the market manage to get past the mentioned resistance level?