The NFP report last Friday beat expectations once again on the headline number raising the record streak to 14. The details of the report weren’t that great though. The unemployment rate jumped from 3.4% to 3.7%, which makes it the biggest M/M increase since the pandemic. The average workweek hours worked ticked lower (employers generally lower the hours before laying off people). All in all, there was something for everyone there.
The US ISM Services PMI came out much lower than expected at 50.3 barely missing the contractionary territory. The employment sub-index fell into contraction and prices paid sub-index decreased substantially returning to the May 2020 level. As a consequence, the market further priced out additional rate hikes from the Fed .
We also got the RBA and the BoC surprising with rate hikes these days and that may have weighed on risk sentiment as well as the market might be fearing something similar from the Fed, but it’s unlikely given that the Fed follows the market pricing and we haven’t yet seen the CPI report.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, the S&P 500 rallied strongly after the NFP report last Friday but stalled at the 4300 level as the ISM Services PMI missed expectations pretty much across the board. This may also be just a pullback ahead of the big risk events next week, that is, the US CPI report and the FOMC meeting.
Nonetheless, the pullback is making the price to converge with the blue 8 moving average which is always a healthy thing in a trend. You don’t want to see the price too far from the 8 moving average as those are generally overbought or oversold times. We should see the S&P 500 finding support at the trendline.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the trendline that should act as support for the S&P 500. The 4240 level is particularly strong as we can find confluence of the previous swing high resistance turned support, the 50% Fibonacci retracement level and of course the trendline.
The buyers are likely to lean on this support zone with a defined risk just below it to target the 4324 high and eventually a breakout. The sellers, on the other hand, will want to see the S&P 500 breaking lower to pile in and extend the selloff into the 4175 level first and, upon a breakout, the 4061 level.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see even clearer the above mentioned setup for the buyers and sellers. Conservative buyers may even want to wait for the moving averages to first cross to the upside before piling in and ride a possible wave to the 4324 high.
The risk event to watch today is the US Jobless Claims report, but it’s unlikely to be that much market moving unless we get big deviations from the expected number:
- A big beat may give the markets soft landing vibes as the labour market may be cooling just enough to bring inflation back to target.
- A big miss should weigh on market sentiment and send the S&P 500 lower as the recessionary fears may return.
