Last Friday, the S&P 500 surged to another all-time high despite a much weaker than expected ISM Manufacturing PMI. The market probably took it as good news because it reduces the chances of the Fed eventually being forced to resume tightening. In fact, the US Dollar and the Treasury yields fell across the board giving the stock market a boost. The path of least resistance remains to the upside until we start to see a deterioration in growth or the labour market cracks.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 bounced around the trendline and extended the rally into another all-time high. From a risk management perspective, the best place for new longs remains the trendline, although we can find some key levels on the lower timeframes as well. The sellers, on the other hand, can only wait for the price to break below the trendline before considering short positions into new lows.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we will also find the red 21 moving average around the trendline for extra confluence. If the price breaks below the trendline, the last line of defence for the buyers will be the 5050 level. The sellers, on the other hand, will want to see the price breaking below the 5050 level to increase the bearish bets into the next support at 4945.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might get a pullback into the most recent swing high level at 5108 where we have also the 38.2% Fibonacci retracement level for confluence. This is where the buyers will likely step in with a defined risk below the level to position for another rally into new highs.
Upcoming Events
This week we have lots of important events on the agenda with the release of the US labour market data and the Fed Chair Powell testifying to Congress. We begin tomorrow with the US ISM Services PMI. On Wednesday, we have the US ADP, the US Job Openings and the Fed Chair Powell speaking. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US NFP report.
