S&P 500 Technical Analysis – These levels will be key for the next direction

Last
week, the NFP missed
expectations for a second time in a row and the previous numbers were all
revised lower. This was seen as a disappointment as the labour market seems to
be a touch weaker than previously expected. Nonetheless, the unemployment rate
fell once again and lessened the disappointment from the miss in the payrolls
number. The worse part for the Fed is that the average hourly earnings beat
expectations, and such high wage growth is not consistent with a sustainable
return to the 2% target. It’s worth reminding though, that the Fed will see
another NFP report before the September meeting, so this NFP doesn’t change
much, but the data leading into the meeting can still weigh on sentiment.

S&P 500 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the S&P 500
sold off from the 4628 high and even broke below the red 21 moving average. This
turns the bias more bearish as the moving averages have also crossed to the
downside, but much will depend on what happens here at the 4494 support. In
fact, we should see the buyers stepping in here with a defined risk below the
level to target again the high and eventually the breakout. The sellers, on the
other hand, will want to see the price breaking lower to pile in even more
aggressively and extend the fall into the trendline.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the S&P
500 has recently broke below a key short term support around the 4560 level and
then pulled back to retest it. The sellers leant on the level as they had confluence with the
red 21 moving average and the 38.2% Fibonacci retracement level.
If the buyers manage to get a rally all the way back to the level, we should
expect the sellers to defend the level again as a break higher would open the
door for new highs.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a divergence with
the MACD right
at the 4494 support. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, if the price breaks above the
most recent swing level at 4518 where we have also the 38.2% Fibonacci
retracement level and the 21 moving average, the buyers will have more control
and are likely to take the price into the 4560 resistance. The sellers, on the
other hand, should pile in again at this short-term resistance to target a
break below the 4494 support.

Upcoming Events

This week the
main event will be the US CPI report on Thursday. The market has been loving
the disinflationary trend seen in the past months, so an upside surprise is
likely to weigh on risk sentiment and push the market lower. On the other hand,
another miss in the data should provide some relief and lead to a rally. After
the US CPI we will also see the latest US Jobless Claims report, which is less
likely to move the market since it’s released at the same time of the CPI, but
big surprises should have an effect nonetheless. Finally, we conclude the week
with the University of Michigan Consumer Sentiment report on Friday where the
market is likely to focus more on the inflation expectations figures.

See also the video below: