The selloff that started at the beginning of August is starting to show signs of weakness. Although nothing changed fundamentally, the S&P 500 started to rise as the market was just probably overstretched. This looks more like a pullback as the miss in yesterday’s US PMIs doesn’t support the bullish case.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 bounced near a key support at 4324 and rallied all the way back to a previous key level where we can also find the confluence with the red 21 moving average. This is where we can expect the sellers to pile in again with a defined risk above the level to target a break below the 4324 support.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the downward trendline that was defining the new downtrend got broken and the price extended towards the 4494 resistance where we can also find the 50% Fibonacci retracement level. The break of the trendline supports the bullish case, but the buyers will need the price to break above the 4494 resistance to confirm the change in trend and start targeting new highs.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline that acted as a good support for the buyers. If the S&P 500 sells off from the 4494 resistance, we will likely see the buyers leaning on this trendline to position for another rally. The sellers, on the other hand, will pile in even more aggressively if the price breaks below the trendline as the latest leg higher would be seen as a fakeout.
Upcoming Events
Today we will have the latest US Jobless Claims report where the market will want to see if the labour market is still holding or starting to weaken. Strong data may cause some hawkish repricing in expectations and it’s unclear if the market will take it as good news because of the resilient labour market or bad news because the Fed will keep at it. Weak data should be more straight forward as it’s likely to cause recessionary fears given the yesterday’s PMIs and send the market lower. Tomorrow we will hear from Fed Chair Powell who is set to speak at the Jackson Hole Symposium, although the expectations are for him to just repeat their data dependency and keep all the options on the table.
