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The S&P 500 stock index (SPX) just saw its first green candlestick in seven trading sessions!

In fact, all three major stock indices saw gains yesterday after the Bank of England (BOE) suspended its gilt sales and announced that it would temporarily buy longer-dated bonds.

S&P 500 Index (SPX500): Daily

S&P 500 Index (SPX500) Daily Chart

S&P 500 Index (SPX500) Daily Chart

The impact of BOE’s bonds purchases spilled over to U.S. Treasury yields, which saw pullbacks after a sharp uptrend.

Lower Treasury yields then helped boost U.S. equities that were already seeing increased buying from end-of-month profit-taking, bargain hunting, and a bit of risk appetite.

SPX jumped from its 3,650 June lows to trade closer to the 3,720 area.

Will yesterday’s candlestick start a longer-term bounce for the stock index?

Eh, maybe not.

Stochastic may be supporting a bounce with its oversold signal but the fundamentals haven’t really changed for U.S. equities.

The Fed hasn’t shown signs of taking cues from BOE and will likely keep on tightening until FOMC members see changes in inflation trends.

The start of October also means the start of another corporate earnings season. Markets will watch out for the impact of the Fed’s higher interest rates and shifts in demand expectations *cough* Apple *cough*

Last but not least, the U.S. core PCE price index – the Fed’s favored inflation gauge – is scheduled tomorrow. Markets see the index accelerating for another month in August, which could put the spotlight back to the Fed’s tightening plans.

If yesterday’s risk-taking extends to Friday’s trading, then SPX could get enough demand to fill in the weekend gap and maybe hit the 3,850 inflection point in the lower time frames.

But if the U.S. core PCE release shifts the traders’ focus back to the Fed’s tightening, or if profit-taking and bargain hunting doesn’t translate to sustained bullish momentum, then SPX could revisit its monthly lows.

Watch how SPX reacts to its major support, my dudes!

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