Yesterday, the S&P 500 opened lower and finished the day negative following another hot US CPI report. This has pushed rate cuts expectations further out with the market now pricing in less rate cuts than the Fed’s dot plot. The Treasury yields skyrocketed across the board putting some pressure on the stock market. Now the market might even think that the economy is still doing great, and the Fed is not going to hike anyway, but there are now good reasons to see a bigger correction to the downside, so the bulls should be extra careful.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it led to pullbacks into the red 21 moving average and the trendline where the dip-buyers kept on stepping in to position for the rallies into new highs. The recent breakout and consolidation though could be a bad omen for the buyers as it opened the door for a possible reversal, which could have been confirmed by the US CPI report yesterday as the price fell back below the moving average.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been bouncing around the 5180 support and fell back below it yesterday following the CPI release. The sellers should step in here with a defined risk above the 5180 zone to position for a drop into the 5100 level targeting a break below it. The buyers, on the other hand, will want to see the price rallying back above the 5180 zone to invalidate the bearish setup and position for a rally into new highs.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action around the 5180 zone. If the price falls into the 5100 level, the buyers should step in with a defined risk below the level to position for a rally into new highs. The sellers, on the other hand, will keep increasing their bearish bets at every break lower.
Upcoming Events
Today we get the US PPI report and the latest US Jobless Claims figures. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment survey.
