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.
This article was written by Giuseppe Dellamotta at investinglive.com.