Last week, the risk sentiment started on a positive note at the beginning of the week due to the lack of a ground offensive in Gaza. Unfortunately, things went south from Wednesday onwards as Israeli PM Netanyahu delivered a speech where he said that they were preparing for a ground invasion.
Moreover, the US Jobless Claims data on Thursday showed another big miss in Continuing Claims, which might be an indication that the labour market is weakening. On Friday, the risk sentiment deteriorated further as market participants likely didn't want to hold long positions into the weekend, especially after early reports of the start of the invasion.
Over the weekend we got reports of a ground offensive being indeed underway. We will see how things will evolve during the week, but the market will also have lots of important economic data to digest.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 continues to make new lows as the sellers are now eyeing the 3800 level after the breakout of the rising channel and key 4194 support. From a risk management perspective, the selloff is now a bit overstretched as depicted by the price 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. The trendline coupled with the 61.8% Fibonacci retracement around the 4300 level would certainly be a great spot for the sellers, but it’s hard to envision such a big rally at the moment.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the 4194 support has now turned into resistance and we can also find the 38.2% Fibonacci retracement level for confluence. This is where we can expect the sellers to step in with a defined risk above the level to position for another drop into new lows. The buyers, on the other hand, will want to see the price breaking above the resistance to increase the bullish bets into the 4300 level.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we should see a pullback into the minor trendline where we can also find the confluence with the 38.2% Fibonacci retracement level and the red 21 moving average. If the price break above the trendline, the buyers will increase the bullish bets into the resistance around the 4200 level.
Upcoming Events
This week, we will get lots of tier one data points with the US labour market and the FOMC decision in focus. Tomorrow, we have the US Employment Cost Index and the Consumer Confidence report. On Wednesday, it will be the time for the US ADP, the ISM Manufacturing PMI and the FOMC rate decision. On Thursday we will get the US Jobless Claims data, while on Friday we conclude the week with the US NFP report and the ISM Services PMI.
