Fundamental
Overview
The S&P 500 extended
the selloff yesterday following fresh Trump’s
tariffs threats and especially additional 10% tariffs on China. The market
has been under pressure ever since last Friday when we got the weak US Flash
Services PMI and later the jump to a new 30-year high in long term inflation
expectations in the Final UMich Consumer Sentiment survey.
The bulk of the selloff
came after the jump in the long-term inflation expectations though. The market
might be fearing that in case we get a slowdown, the Fed might not be fast
enough in cutting rates amid inflation remaining above target and uncomfortably
high long-term inflation expectations. Trump’s tariffs threats add to
expectations of a slowdown in growth.
March will be a great month
for traders because we will probably have the most important NFP and CPI
reports of the year ahead of the March FOMC decision where we will also get the
updated SEP and Dot Plot. The markets will need benign data on the employment
front coupled with easing inflationary pressures to trigger a rally. Conversely,
bad data coupled with higher inflationary pressures might even lead to a new
bear market.
S&P 500
Technical Analysis – Daily Timeframe
S&P 500 Daily
On the daily chart, we can
see that the S&P 500 is bouncing off of the key trendline
as the dip-buyers are stepping in with a defined risk below the trendline to
position for a rally into a new all-time high. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into the
5720 level next.
S&P 500 Technical
Analysis – 4 hour Timeframe
S&P 500 4 hour
On the 4 hour chart, we can
see that we now have a downward trendline defining the bearish momentum. If we
get a pullback into it, we can expect the sellers to lean on the trendline with
a defined risk above it to position for the break below the major trendline.
The buyers, on the other hand, will look for a break higher to increase the
bullish bets into new highs.
S&P 500 Technical
Analysis – 1 hour Timeframe
S&P 500 1 hour
On the 1 hour chart, there’s
not much else we can add here as the buyers will look for a bounce around these
levels, while the sellers will target a break below the key trendline to extend
the selloff into new lows. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we conclude the week with the US PCE
data.
