The recent beat in the NFP data accompanied by weakening details like the higher unemployment rate and lower average weekly hours, hasn’t weighed too much on the S&P 500 as it saw a resilient but less tight labour market, which may eventually lead to lower inflation without too much pain in the economy.
The miss in the ISM Services PMI hasn’t impacted the market either, on the contrary, the lower prices paid sub-index may have caused even more speculation that core inflation could fall without too much damage.
The big miss in Jobless Claims was taken with a pinch of salt due to seasonal adjustments and the Continuing Claims showing more improvement. Overall, the market focused more on the good side of the data rather than the bad one.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 managed to probe above the key 4324 swing high level from August 2022, although it’s curious that it did so without any clear fundamental catalyst. There may be some FOMO kicking in at these levels. If the S&P 500 keeps trending upwards, there’s no real resistance until the 4500 level.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a divergence between the new high and the MACD. This may be significant, especially near this key level. Generally, a divergence signals a pullback or a reversal. In this case, the first option is the pullback with the price likely to fall towards the upward trendline where we can find confluence with the 61.8% Fibonacci retracement level, a previous swing high resistance turned support and the red 21 moving average.
We should see the buyers leaning on this support zone with a defined risk just below it to target another higher high. The sellers, on the other hand, will want to wait for the price to break through the trendline before piling in and extend an eventual selloff towards the 4175 level.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the short-term price action with the S&P 500 consolidating a bit near the highs. From a risk management perspective, the buyers may be better off waiting for the pullback as the price looks overstretched here. The sellers, on the other hand, should wait for the break of the trendline given that they don’t have much to lean on to at the current levels.
This week there are many important events for the S&P 500 beginning with the US CPI report tomorrow, that is likely to seal the expectations for the FOMC rate decision the following day, and later in the week another Jobless Claims report and the University of Michigan consumer sentiment survey, which has impacted the market a lot last time with the big jump in long term inflation expectations.
