Yesterday, the US CPI report came basically in line with expectations as the market was already expecting higher energy prices to push up the August inflation readings. The Core measure, which is what the Fed is focused on, was in line with forecasts with the monthly figure just a touch higher than expected. The core 3-month annualised rate is now 2.4%, which is a good indicator for the Fed that their policy is working well. Now, the question is whether the labour market softens enough to bring inflation sustainably back to target without a recession. And this is something that never happened in history.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 is still consolidating on the key support around the 4455 level where we have also the confluence with the red 21 moving average. This is where the buyers are likely piling in with a defined risk below the level to target a rally into the 4540 resistance.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we’ve been stuck in a tight range for a week now as the market is probably awaiting some strong fundamental catalyst to push it in either direction. A break below the support will invalidate the bullish setup and likely lead to more selling pressure, ultimately taking the price to the 4328 support.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the tight range between the 4455 support and the 4490 resistance. More conservative buyers may want to wait for the price to break above the resistance before piling in and ride the rally into the next resistance at 4540.
Upcoming Events
Today is likely to be a volatile one given that we are going to see lots of top tier economic indicators released at the same time. In order of importance, we will get the US Jobless Claims, Retail Sales and PPI data. The September FOMC meeting is already a done deal as the market is pricing a 97% probability of a pause, so the data is going to influence the November and December expectations. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment report.