Fundamental
Overview
The soft NFP report on Friday weighed on the risk sentiment
as growth expectations took a hit. The S&P 500 fell to new lows before erasing
most of the losses today as Fed’s Williams said over the weekend that he
would go into the September meeting with “very much an open mind”.
Overall, the data wasn’t as
bad as one might think by just looking at the reaction in the markets but given
that we were positioned for a strong report, it might have caught people by
surprise. The market is now pricing 58 bps of easing by year-end for the Fed
compared to just 35 bps before the NFP release.
Higher chances of easing
and lower inflation figures from the ISM Manufacturing and UMich reports,
should be supportive for the stock market going forward. We have the ISM
Services PMI and the Jobless Claims data this week.
A combination of lower
inflation in the ISM and good jobless claims figures might give further boost
to the S&P 500 to push into new highs as the market will start to look
forward to Fed Chair Powell opening the door for a cut in September at the
Jackson Hole Symposium.
S&P 500
Technical Analysis – Daily Timeframe
S&P 500 Daily
On the daily chart, we can
see that the S&P 500 eventually extended the pullback following the
slightly more hawkish Fed Chair Powell and then the softer than expected NFP
report. If the pullback extends further, we can expect the buyers to step in around
the 6,170 ish support to position for another leg higher. The
sellers, on the other hand, will look for a break lower to increase the bearish
bets into the 5,800 level next.
S&P 500 Technical
Analysis – 4 hour Timeframe
S&P 500 4 hour
On the 4 hour chart, we can
see that the dip-buyers piled in around the swing low at 6,241 where we had
also the upward trendline
for confluence.
Technically, the buyers couldn’t ask for a better setup as it gave a great risk
to reward trade with a clear invalidation below the trendline. The sellers will
need the price to break below the low to invalidate the bullish setup and
increase the bearish bets into the 6,170 support next.
S&P 500 Technical
Analysis – 1 hour Timeframe
S&P 500 1 hour
On the 1 hour chart, we can
see that we had a downward trendline defining the pullback into the upward
trendline and, as the price broke above it, the buyers increased the bullish
bets into new highs. We have also a minor support around the 6,295 level that
is also the neckline of the potential double
bottom. If the price pulls back into it, we can expect the buyers to lean
onto that level to keep pushing into new highs, while the buyers will look for
a break lower to start targeting a break below the major trendline.
Upcoming
Catalysts
Tomorrow we have the US ISM Services PMI and
on Thursday, we get the latest US Jobless Claims figures.
