FUNDAMENTAL OVERVIEW
The S&P 500 has been stuck in a consolidation below the 7K level since Monday as traders awaited the US NFP and CPI reports this week. We got the NFP report yesterday and it was a hot one as it beat expectations by a big margin with the unemployment rate falling further to 4.3% despite an increase in participation rate.
The market reacted positively even though we got a slightly hawkish repricing as traders pared back the total easing seen by year-end from 60 bps to 53 bps after the release. This is in line with the current regime of good news being good news as long as inflation continues to slowly head towards target.
Tomorrow, we will have an important test as we get the US CPI report. In case we get soft data, we will likely see the S&P 500 rallying into a new all-time high amid stabilising labour market and easing inflation. On the other hand, a hot report will likely trigger a stronger hawkish repricing and weigh on the market in the short-term.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that the S&P 500 rallied strongly from the December lows before pausing at the 7K level. If the price reaches the all-time highs, we can expect the sellers to step in to position for a drop back into the December lows. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new record highs.
S&P 500 TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the rangebound price action. Traders will likely continue to play the range until we get a breakout on either side which could come with the US CPI report tomorrow.
S&P 500 TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the buyers will either pile in on a break above the resistance or around the 6,921 low, while the sellers will look for shorts around the all-time highs or on a break below the 6,921 low. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the US Jobless Claims figures, while tomorrow we conclude the week with the US CPI report.
