Last week the US data surprised to the upside with the ISM Services PMI and Jobless Claims beating expectations by a big margin. The market didn't like the strong data as it raises the chances of another rate hike in November. In fact, the S&P500 sold off following the PMI beat with some consolidation thereafter, even after the strong Jobless Claims. The market seems to be trading on “good news is bad news” at the moment, but the outlook remains uncertain.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 rallied back to retest the broken trendline and sold off into the red 21 moving average. The bias is still bullish given that the price has recently made a higher high and the moving averages are crossed to the upside, but the bearish signs keep on accumulating.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is consolidating around a key support zone. The recent price action around the broken trendline looks like a bearish flag pattern with the target standing at the next major trendline. If the price breaks lower, the sellers should pile in with a defined risk above the level and target the 4194 support. The buyers, on the other hand, are likely to step in here with a defined risk below the support and target a new higher high.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have also the confluence with the 50% Fibonacci retracement level around the key support, and the price might also be forming an inverted head and shoulders pattern. The neckline would be at the recent swing point around the 4473 level. If the price breaks above that level, we should see more buyers piling in and extend the rally into the 4530 resistance.
Upcoming Events
This week is likely to be a volatile one given the release of top tier economic indicators including the US CPI. In fact, on Wednesday we get the US CPI report, which is expected to show an acceleration in the headline inflation but a deceleration in the core measure. On Thursday, we get the US PPI, Retail Sales and Jobless Claims data. Finally, we conclude the week with the University of Michigan Consumer Sentiment report on Friday.
