Last week the US data surprised to the upside with
the ISM Services PMI and Jobless Claims beating
expectations by a big margin. The market didn’t like the strong data as it
raises the chances of another rate hike in November. In fact, the S&P500
sold off following the PMI beat with some consolidation thereafter, even after
the strong Jobless Claims. The market seems to be trading on “good news is bad
news” at the moment, but the outlook remains uncertain.
S&P 500 Technical
Analysis – Daily Timeframe
S&P 500 Daily
On the daily chart, we can see that the S&P 500
rallied back to retest the broken trendline and sold
off into the red 21 moving average. The
bias is still bullish given that the price has recently made a higher high and
the moving averages are crossed to the upside, but the bearish signs keep on
accumulating.
S&P 500 Technical
Analysis – 4 hour Timeframe
S&P 500 4 hour
On the 4 hour chart, we can see that the price is
consolidating around a key support zone.
The recent price action around the broken trendline looks like a bearish flag pattern
with the target standing at the next major trendline. If the price breaks
lower, the sellers should pile in with a defined risk above the level and
target the 4194 support. The buyers, on the other hand, are likely to step in
here with a defined risk below the support and target a new higher high.
S&P 500 Technical
Analysis – 1 hour Timeframe
S&P 500 1 hour
On the 1 hour chart, we can see that we
have also the confluence with
the 50% Fibonacci
retracement level around the key support, and the
price might also be forming an inverted head and shoulders
pattern. The neckline would be at the recent swing point around the 4473 level.
If the price breaks above that level, we should see more buyers piling in and
extend the rally into the 4530 resistance.
Upcoming Events
This week is likely to be a volatile one given the
release of top tier economic indicators including the US CPI. In fact, on
Wednesday we get the US CPI report, which is expected to show an acceleration
in the headline inflation but a deceleration in the core measure. On Thursday,
we get the US PPI, Retail Sales and Jobless Claims data. Finally, we conclude
the week with the University of Michigan Consumer Sentiment report on Friday.