This week we have two main risk events: the US CPI report and the FOMC meeting. These events will move the market in one way or the other depending on their outcomes. The current sentiment is bearish because after an incredible rally fuelled by worse than expected economic data and less hawkish Fed, the market recently leant on the defensive side as important reports surprised to the upside.
The NFP report showed more jobs created and higher than expected wages with even a higher revision for the previous figures, which could indicate that inflation may be moderating but it may be harder for the Fed to return to their 2% target.
The ISM Services PMI beat expectations and the prices paid sub-index remained high showing a resilience in the services sector.
Finally, the US PPI beat expectations as well making the market fear a possible beat in the CPI report this week. The US CPI report may shape the FOMC reaction function.
Going back to the chart. Below you can see how the price bounced from the lower band of the big yellow channel which has confluence with the lower band of the green and red regression channel. The price may now fall back to the 3937 level which is the area having a previous PoC (Point of Control) and VWAP (Volume-Weighted Average Price) and should provide some support.
A 2-hours S&P500 E-mini Futures Chart on tradingview.com
Looking ahead, the yellow channel may turn into a bearish flag pattern of the entire bear market. The breakout down of the strong 3920 level which acted as support 3 times and has confluence with the lower band of the yellow and the regression channel, may give the price momentum to resume the downtrend. So, watch out for the FOMC meeting on Wednesday as traders will be looking for trades after the event.
Watch the S&P 500 technical analysis video below to get a more detailed overview of the current state of the S&P500 and be prepared for the next moves. Click on the like button so you can get back to it if you need a refresh before the FOMC meeting.
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