Yesterday, the S&P 500 finished the day positive as a big drop in the price index in the ISM Services PMI turned the sentiment around and quelled some inflation fears. In fact, the market stayed under pressure since the hot ISM Manufacturing PMI on Monday as the increase in the price index renewed fears of a reacceleration in inflation. For now, the market might take a sigh of relief, but all eyes then will turn on the US CPI report next Wednesday.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it led to pullbacks into the red 21 moving average and the trendline where the dip-buyers kept on stepping in to position for the rallies into new highs. The recent breakout could turn into a fakeout if the price manages to rally back above the trendline after the ISM Services PMI.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price bounced on a strong support around the 5200 level where we had the confluence of the previous swing high level, the daily 21 moving average and the 38.2% Fibonacci retracement level. The buyers will likely step in here with a defined risk below the support to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to pile in more aggressively and target the 5103 level.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the rejection of the broken trendline and the bounce on the support zone. The buyers will want to see the price breaking above the 5229 level to increase the bullish bets into new highs as a break below the support would invalidate the setup and trigger a selloff into new lows.
Upcoming Events
Today we will see the latest US Jobless Claims figures, while tomorrow we conclude the week with the US NFP report.
