Fundamental
Overview
The strong US NFP report last Friday led to some defensive risk
sentiment in the S&P 500 as we head into the US CPI and FOMC decision
tomorrow. In the big picture, the data didn’t change much but it added a bit of
uncertainty into the market which is now waiting for the US CPI to clear it
out.
In case the US CPI comes
out soft, we can expect the S&P 500 extending the rally into new highs. On
the other hand, a hot report will likely trigger a selloff as the market will want
to err on the cautious side into the FOMC decision.
S&P 500
Technical Analysis – Daily Timeframe
S&P 500 Daily
On the daily chart, we can
see that the S&P 500 reached a new all-time high recently around the 5385
level where it consolidated as the strong US NFP report brought some
uncertainty in the market.
From a risk management
perspective, the buyers will have a better risk to reward setup around the trendline
although we will likely need a hot US CPI report tomorrow to trigger such a pullback.
The sellers, on the other hand, will want to see the price breaking below the
trendline to start targeting the 5000 level.
S&P 500 Technical
Analysis – 4 hour Timeframe
S&P 500 4 hour
On the 4 hour chart, we can
see that the price recently broke below the minor trendline which was defining
the bullish momentum from the 5200 level. The price consolidated ever since and
the first target for the pullback should be around the 5313 support
where we can also find the 38.2% Fibonacci
retracement level of the entire rally. A break below that level will likely
take us into the major trendline around the 5280 level where we have the 61.8% Fibonacci
retracement level.
S&P 500 Technical
Analysis – 1 hour Timeframe
S&P 500 1 hour
On the 1 hour chart, we can
see more clearly the consolidation around the highs with the 5372 level acting
as a strong resistance. A break above it should see the buyers gaining more
conviction and increasing the bullish bets into new highs. For now though, it
looks like we could keep consolidating until tomorrow’s big events. The red
lines define the average
daily range for today.
Upcoming
Catalysts
This week is a bit empty on the data front although we will
have the biggest market moving events tomorrow when we get the US CPI data and
the FOMC rate decision. On Thursday, we have the US PPI and the latest US
Jobless Claims figures. On Friday, we conclude the week with the University of
Michigan Consumer Sentiment survey.
