Fundamental Overview
The soft NFP report on Friday was again faded completely by the stock market because of the focus on Fed rate cuts. In fact, the dovish bets on the Fed increased and the market is now expecting three rate cuts by year-end (68 bps).
Moreover, we have also an 8% probability of a 50 bps cut in September but that will likely happen only if we get a soft CPI report today. In that case, the stock market might get another boost to push into new all-time highs.
The bigger picture hasn’t changed much as the stock market continues to see better growth ahead despite all the doom and gloom coming from analysts and economists. The market doesn’t care about what has happened in the past quarters but how things are likely to evolve in the next quarters.
And those positive expectations are supported by the upcoming rate cuts and the fact that things are not as bad as people think. We just have a frozen labour market most likely due to the uncertainty created by Trump’s policies in the first half of the year. That is now behind us, and the rate cuts could spur growth and improve economic activity, which is a good thing for the stock market.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 is trading inside what looks like a rising wedge. If we move into the top trendline, we can expect the sellers to step in with a defined risk above the trendline to position for a drop into the bottom trendline targeting a breakout. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new all-time highs, but will also continue to lean on the bottom trendline to keep pushing into the upside.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor upward trendline defining the bullish momentum. The buyers will likely continue to lean on the trendline with a defined risk below it to keep pushing into new highs, while the sellers will look for a break lower to target a pullback into the bottom trendline of the wedge.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much we can add here other than highlighting the support zone around the trendline and the 6,520 level. In case the price moves into that zone, we can expect the buyers to step in to position for a rally into new highs, while the sellers will target a breakout to the downside to extend the drop into the 6,420 level next. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US CPI report and the latest US Jobless Claims figures. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment report.
