On the daily chart below for the S&P 500, we can see that the last week’s rally and the try to break above the key 4175 resistance failed once again. The buyers just can’t extend above the key resistance as the bullish catalysts are getting exhausted. The beat in the ISM Manufacturing PMI report was the first catalyst that pushed the market lower as traders feared another wave of inflationary pressures.
The next day the big miss in the US Job Openings pushed the price lower again as the market feared a deterioration in the labour market. Finally, the Fed raised rates by 25 bps as expected and hinted to a pause, but Fed Chair Powell then stated that they are ready to do more if the data starts to surprise to the upside. The price is now back at the previous strong resistance now turned support and the moving averages have crossed to the downside. What happens next will depend on the data.
In the 4 hour chart below, we can see the selloffs caused by the economic data and the FOMC policy decision. The price has bounced from the key support level yesterday as the market is now in waiting mode until the NFP report today. This is a big one and it looks like any outcome may be bearish for the market. A miss should make the market more fearful about a deteriorating labour market, and a beat may lift the odds of another hike in June by the Fed and give overtightening fears. The technicals should help in this case.
In the 1 hour chart below, we can see that the price has been diverging with the MACD falling into the key 4061 support level. This is generally a sign of weakening momentum often followed by pullbacks or reversals. The levels to watch are the 50% Fibonacci retracement level where we have also the confluence with the trendline, and then of course the 4175 resistance.
The sellers are likely to lean on that 50% Fibonacci level with a defined risk just above the trendline and target the break below the 4061 support. The buyers, on the other hand, will want to see the price to break above the trendline to start positioning for a bullish run to the resistance at 4175.
