Yesterday, the S&P 500 opened lower and ended the day negative following another hot US CPI report. This pushed back rate cut expectations, with the market now pricing in lower rate cuts than the Fed’s dot plot predicted. Treasury yields have soared across the board, putting some pressure on the stock market. Today, the market might even think that the economy is still doing well and that the Fed is not going to raise rates anyway, but there is now good reason to see a larger downward correction, the Bulls should therefore be very careful.
S&P 500 Technical Analysis – Daily Timeline
S&P 500 daily
On the daily chart, we can see that the S&P 500 has been diverging with the MACD for a long time. This is usually a sign of weakening momentum, often followed by pullbacks or reversals. In this case, this led to pullbacks towards the red 21 moving average and trendline where dip buyers continued to step in to position themselves for rallies to new highs. The recent breakout and consolidation could, however, bode ill for buyers as it would open the door for a possible reversal, which could have been confirmed by the US CPI report yesterday, as the price fell back below the moving average.
S&P 500 Technical Analysis – 4 hour time frame
S&P 500 4 hours
On the 4-hour chart, we can see that the price bounced around the 5180 support and fell back below yesterday after the CPI release. Sellers should step in here with defined risk above the 5180 area to position for a decline to the 5100 level while aiming for a break below. Buyers, on the other hand, will want to see price rally above the 5180 area to invalidate the bearish setup and position for a rally to new highs.
S&P 500 Technical Analysis – 1 Hour Time Frame
S&P 500 1 hour
On the hourly chart, we can take a closer look at the recent price action around the 5180 area. If price falls below the 5100 level, buyers should intervene with a defined risk below the level to position themselves for ‘a rally to new heights. Sellers, on the other hand, will continue to increase their bearish bets with each bearish breakout.
Events to come
Today we receive the US PPI report and the latest US jobless claims figures. Tomorrow we wrap up the week with the University of Michigan Consumer Sentiment Survey.
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