Following the big rally after the miss in the US CPI report, the market started to get exhausted near a key swing high level. The data is still supporting the soft-landing narrative as the US Retail Sales and Jobless Claims last week surprised to the upside. The market may just be pulling back as we approach the FOMC rate decision and there may be some profit taking or defensive positioning going on. Nevertheless, it looks like as long as we keep getting good economic data, the S&P 500 can keep on going up.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 has been rallying non-stop since the bounce on the red 21 moving average and broke out of the 4494 resistance following the miss in the US CPI report. The price has now started to pull back just before reaching the key 4628 high. Barring any negative news, we should see the S&P 500 rallying back up into the 4628 high where we should find strong sellers waiting to position for a big fall.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that since breaking out of the ascending triangle pattern, the S&P 500 surged towards the 4628 high with almost no pullbacks. The bullish momentum weakened though as the moving averages have crossed to the downside and the price may now retrace all the way back to the 4494 support.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the upward trendline has been broken downwards as the bearish momentum prevailed and the price is now testing a strong support level at 4560. The buyers should be leaning on this level with a defined risk below it to position for another rally that would hopefully break above the key 4628 resistance. The sellers, on the other hand, will want to see the price breaking below the support to pile in and extend the fall into the 4494 support.
Upcoming Events
This week we will have many market moving events. We begin today with the US PMIs where we may see the market rally in case the data beats expectations and falling in case the data misses. Next, we will have the FOMC rate decision on Wednesday where the Fed is expected to hike by 25 bps bringing the interest rates to 5.25-5.50%. On Thursday, it will be the time for another US Jobless Claims report where a beat should be bullish for the market while a miss should be bearish. Finally, we conclude the week with the US PCE and ECI reports where the market would like to see softer numbers to confirm the soft-landing narrative.
