Last Friday, the S&P 500 finished the day basically unchanged after the release of two key economic reports. The US NFP report beat expectations, with the market initially trimming rate cuts expectations and spiking downwards, but after a couple of minutes, the price reversed as under the hood the data wasn’t as good as it seemed. Sometime later, we got the release of the ISM Services PMI and that’s where the real shocker came from.
Besides the data missing across the board, the employment sub-index cratered to levels seen only in the dot-com recession, the global financial crisis and the covid recession. Although the market might keep on cheering about the upcoming rate cuts, these are bearish signals and they are coming right around the stock market highs, so the bulls should start to get extra careful going forward.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 is breaking below a key support where we have the confluence of the recent swing low and the 21 moving average. This should open the door for an even bigger drop into the next support around the 4547 level. The sellers should have even more conviction now while the buyers will need the price to rise back above the 4720 level to regain some control.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is consolidating around the support zone around the 4700 level where we can also find the 38.2% Fibonacci retracement level for confluence. This is where the buyers are piling in with a defined risk below the support to position for a rally into new highs. There’s currently a strong battle going on, but we should find the winner in the next few days.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action and we can notice that the price is diverging with the MACD right around the support. This is generally a sign of weakening momentum often followed by pullbacks or reversals. If we get a break above the most recent lower high around the 4720 level, the buyers should have the confirmation of a reversal and gain even more conviction for new higher highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the next support around the 4547 level.
Upcoming Events
This week is basically empty on the data front with the only two notable releases scheduled for Thursday when we will get the US CPI report and the US Jobless Claims figures.
