Fundamental Overview
The S&P 500 had a good performance at the start of last week following the US CPI report as the data came mostly in line with expectations. In the following days though, we got some hottish data with the US PPI beating expectations by a big margin, the US Jobless Claims improving further and the inflation expectations in the UMich survey surprising to the upside.
Following the data, traders turned their attention to Fed Chair Powell’s speech at the Jackson Hole Symposium on Friday. The risk of something hawkish led to profit-taking and some hedging into the event, which eventually turned into a deeper pullback.
Most likely, Powell won’t pre-commit to anything and just reiterate that they will decide based on the totality of the data. This is the baseline expectation. If he were to signal a rate cut in September, then the S&P 500 will likely rally as hedges get unwound.
Conversely, if he were to close the door for September by saying something like “we might not have enough data to consider a rate cut in September”, it would be interpreted as hawkish, and we should see more downside for the stock market.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 couldn’t sustain the rally above the previous all-time. The sellers piled in once the price fell below the level to position for a deeper pullback into the major trendline around the 6,380 level. That’s where we can expect the buyers to step in with a defined risk below the trendline to position for a rally into a new all-time high.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a minor upward trendline defining the bullish momentum on this timeframe. As the price broke below the trendline and the previous all-time high level, the sellers took back control. There’s not much else to add here as the buyers will have a better risk to reward setup around the trendline, while the sellers will want to see a further break to extend the pullback into the 6,241 level next.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we now have a minor downward trendline defining the bearish momentum on this timeframe. The sellers will likely lean on the trendline with a defined risk above it to position for a drop into new lows. The buyers, on the other hand, will look for a break higher to pile in for a rally into new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have Fed’s Waller speaking and the FOMC meeting minutes. Tomorrow, we get the US Flash PMIs as well as the US Jobless Claims figures. Finally, on Friday, we conclude the week with Fed Chair Powell speech at the Jackson Hole Symposium.
