Last Friday the NFP report surprised everyone with a huge beat to expectations, 517K jobs added compared to 185K expected, and the unemployment rate fell to 3.4%, the lowest in 53 years. The average hourly earnings though remained unchanged at 0.3% M/M and fell to 4.4% Y/Y. Looks nice with labour market strength and wage disinflation. Soft landing vibes…

Some time later the ISM Services PMI surprised to the upside with a big jump back into expansion. Activity in the services sector seems to have picked up again, which makes wonder if the recent easing in financial conditions led to a reacceleration in economic activity.

Looking forward, will this make it harder for inflation to come back to the Fed’s 2% target? And will the Fed need to go higher than projected in their December 2022 meeting?

S&P500 Technical Analysis

S&P500 technical analysis

On the daily chart above, we can see that the price couldn’t break the 4175 resistance after very strong economic reports. Maybe the bulls are getting cautious as the Fed may be forced to go higher with interest rates or indeed hold for longer than previously expected.

The bulls will need a clear break out of that resistance to target the next resistance at 4300. The blue minor upward trendline for now will act as support for the bullish trend. A break below that trendline and things start to get interesting for the bears.

S&P500 technical analysis

On the 4 hour chart above, we can see that the price is struggling at the resistance. From a risk management standpoint, a pullback to the trendline and one of the Fibonacci retracement levels would offer a better risk to reward trade.

S&P500 technical analysis

Looking at the 1 hour chart, we can see the two possible scenarios:

· Get above the 4208 resistance and the bulls can try to extend the move to the next resistance at 4300.

· Get below the 4133 support and it opens up a move lower to possibly 4050 with a breakout below the trendline leading to further sell off.