Last week was the Jackson Hole Symposium week and we have heard from many Fed members about their opinions on the momentary policy going forward. There seems to be a consensus for a pause in September as they try to “carefully” assess the lag effects of their tightening to date. Nonetheless, they are ready to do more if conditions require further tightening and in fact, they keep reaffirming their data dependency. The economic data since the last FOMC meeting has been surprising to the upside with the labour market remaining very strong, but the last two inflation reports showed the Core M/M inflation rising by just 0.16%. Overall, it looks like a soft landing scenario but the latest US PMIs showed that there might be pain ahead.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 bounced around the key support at 4324 and rallied into the red 21 moving average. The sellers were waiting for this pullback leaning on the moving average and pushed the price lower again targeting a break below the support level. The bias for now remains bearish as the price has been printing lower lows and lower highs and the moving averages are crossed to the downside.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we got a breakout of the downward trendline into the 4494 resistance and then a quick selloff back below the trendline. This might have been a fakeout and generally what follows is a continuation of the original trend. Therefore, the buyers will need to break above the trendline again to invalidate the bearish setup and position for a rally into the 4494 level again.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the quick selloff from the 4494 resistance broke through the black counter-trendline with the price then extending the drop towards the previous low. We got another pullback into the downward trendline where we can also find the 50% Fibonacci retracement level for confluence. This is where we can expect the sellers piling in with a defined risk above the level to target the 4324 support first and eventually new lows. The buyers, on the other hand, will need to break above the trendline to invalidate the bearish setup and push the price to new highs.
Upcoming Events
This week is an important one given that we will see many key labour market data, including the US NFP, before the next FOMC meeting. We start tomorrow with the US Consumer Confidence and the US Job Openings. On Wednesday, we have the US ADP report. Moving on to Thursday, we will have the US Jobless Claims and the US PCE data. Finally, we conclude the week with the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps all the options on the table, it’s also leaning more towards a pause in September, so we will need strong data to make the market to expect a hike at the upcoming meeting.
See also the video below
