Last Friday, the S&P 500 ended the day positive following the US NFP report. In fact, the data beat expectations across the board, showing once again that the labor market remains resilient without much inflationary pressure as wage growth continues to slow. The focus will now be on US CPI data on Wednesday, as a hot report could change the Fed’s near-term strategy and further delay rate cuts.
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 could, however, bode ill for buyers as it opens the door to a possible reversal, which will likely be confirmed or denied by the US CPI report on Wednesday.
S&P 500 Technical Analysis – 4 hour time frame
S&P 500 4 hours
On the 4-hour chart, we can see that price broke below the support at 5180 but was unable to maintain the bearish momentum as buyers rallied more aggressively following the Goldilocks NFP report last Friday. If the price were to continue to decline and move back below support, then we can expect sellers to take control and push the price to new lows with the 5100 level as their first target.
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 with the V-shaped recovery following the break below the 5180 support. A break above the 5223 level should see more buyers enter. build to target new highs, while a break below 5180 support will likely result in a further fall to new lows.
Events to come
This week is going to be a little quieter on the data side, with US CPI being the main highlight. On Wednesday we will have the US CPI report which will likely decide whether the Fed will further delay rate cuts. On Thursday we will receive the US PPI and the latest US jobless claims figures. Finally, on Friday we wrap up the week with the University of Michigan Consumer Sentiment Survey.
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