Last Friday, the S&P 500 extended the pullback from the highs reached after a strong rally triggered by the FOMC decision. This might have been just a profit-taking move from overstretched levels as nothing has changed in the data as we got strong US Jobless Claims figures and good US PMIs. Looking ahead, we are approaching a new month where we get the key economic data including the US CPI. The path of least resistance though remains to the upside until the labour market cracks or the reacceleration in inflation gets confirmed and we get some hawkish repricing in interest rates expectations.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it led to pullbacks into the red 21 moving average and the trendline where the dip-buyers on stepping in to position for the rallies into new highs. The price got a bit overstretched after the FOMC rally as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers will have a much better risk to reward setup around the trendline where we can also find the confluence with the 50% Fibonacci retracement level and the red 21 moving average. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a bigger correction to the downside.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is at a minor support zone where we have a minor trendline with the confluence of the 38.2% Fibonacci retracement level and the red 21 moving average. The buyers are likely to step in here with a defined risk below the trendline to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price breaking lower to position for a break below the major trendline with a better risk to reward setup.
Upcoming Events
This week is going to be shortened by the US Holiday on Friday. Tomorrow, we have the US Durable Goods and Consumer Confidence reports. On Wednesday we have Fed's Waller speaking. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude with the US PCE report and Fed Chair Powell.
