Last Friday, the market sold off as the University of Michigan Consumer Sentiment report saw a big miss across the board with the inflation expectations figures spiking back up. This might be a signal that the consumers are indeed weakening, and it could be a bad omen for the broad market. Moreover, we got some defensive positioning into the weekend as there were some expectations that Israel could start a ground offensive in Gaza and that could have led Iran to join Hamas with uglier scenarios becoming likely from that point onwards.
The actual events fell short of expectations as we haven’t got a ground operation and, although we got mixed signals, it seems like Iran is not intentioned to join this war “provided that Israel does not dare to attack Iran”. This could lead to a relief rally and the technical levels can help in identifying the likely entry and exit points.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 fell back to the broken resistance now turned support around the 4331 level where we can also find the 38.2% Fibonacci retracement level for confluence. This is where we can expect the buyers to step in with a defined risk below the support to target the trendline around the 4050 level.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that besides the support and the 38.2% Fibonacci retracement level, we have also the red 21 moving average for confluence. This makes this zone a good entry point for the buyers but could give also the sellers more conviction to position for a bigger drop if the price continues lower invalidating the bullish setup.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the support zone around the 4331 level where the buyers are likely to pile in with a defined risk below the level. A break above the recent high around the 4383 level is likely to increase the bullish momentum into the major trendline where the sellers will step in with an even better risk to reward setup and target another big selloff into the lows.
Upcoming Events
This week is a bit empty on the data front. Tomorrow we will get the US Retail Sales data and it will be interesting to see if the worse consumers’ sentiment translated into weaker spending. On Thursday, we will see another US Jobless Claims report where the market will want to see if the miss in Continuing Claims last week was just a blip or something is starting to deteriorate in the labour market. On the same day we will also hear from Fed Chair Powell with the market being attentive to any type of signal on the upcoming rate decision.