Last week, the Fed hiked the interest rates by 25 bps as widely expected keeping everything unchanged. Fed Chair Powell reiterated their data dependency and kept all the options on the table. The economic data since the FOMC meeting has been pretty solid and the labour market indicators keep on running hot. This week we got a selloff that began with the rating agency Fitch downgrading US credit rating to AA+ from AAA and then extended further as the US ADP report came in hot again.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that we already had a divergence with the MACD coming into the key 4628 resistance level. This is generally a sign of weakening momentum often followed by pullbacks or reversals. If this is a pullback, we should see the buyers piling in here near the 4494 support. The sellers, on the other hand, will want to see the price breaking below the support to increase the selling pressure and take the S&P 500 into the trendline.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the S&P 500 recently broke below a key support zone and it’s now pulling back to probably retest it. This is where we should find the sellers leaning on this support turned resistance where we can find the confluence with the 38.2% Fibonacci retracement level and the red 21 moving average. The buyers, on the other hand, will need to break above this resistance with conviction to invalidate the bearish setup and target a break above the 4628 high.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current pullback towards the resistance with a counter-trendline defining the short-term bullish momentum as we can also see from the crossover of the moving averages. If the price breaks below the counter-trendline, the sellers are likely to pile in and target a break below the 4494 support.
Upcoming Events
Today, all eyes will be on the US NFP report. The Fed will see another NFP report before the next meeting so this one won’t decide what they are going to do but it can change market expectations, nonetheless. It’s hard to see what the market is going to do with this data, but a strong report should weigh on the S&P 500 as the market would expect the Fed to remain hawkish and weak readings are likely to cause a selloff as the market may start to fear a recession on the horizon. The technicals here should be more helpful to manage risk and position in line with the flow.
See also the video below:
