Last week, the risk sentiment started on a positive
note at the beginning of the week due to the lack of a ground offensive in
Gaza. Unfortunately, things went south from Wednesday onwards as Israeli PM Netanyahu
delivered a speech where he said that they were preparing for a ground
invasion.
Moreover, the US Jobless Claims data on
Thursday showed another big miss in Continuing Claims, which might be an
indication that the labour market is weakening. On Friday, the risk sentiment
deteriorated further as market participants likely didn’t want to hold long
positions into the weekend, especially after early reports of the start of the
invasion.
Over the weekend we got reports of a ground offensive being indeed
underway. We will see how things will evolve during the week, but the market
will also have lots of important economic data to digest.
S&P 500 Technical
Analysis – Daily Timeframe
S&P 500 Daily
On the daily chart, we can see that the S&P 500
continues to make new lows as the sellers are now eyeing the 3800 level after
the breakout of the rising channel and key 4194 support. From a
risk management perspective, the selloff is now a bit overstretched as depicted
by the price distance from the blue 8 moving average.
In such instances, we can generally see a pullback
into the moving average or some consolidation before the next move. The trendline coupled
with the 61.8% Fibonacci retracement around
the 4300 level would certainly be a great spot for the sellers, but it’s hard
to envision such a big rally at the moment.
S&P 500 Technical
Analysis – 4 hour Timeframe
S&P 500 4 hour
On the 4 hour chart, we can see that the 4194
support has now turned into resistance and we can also find the 38.2% Fibonacci
retracement level for confluence. This is
where we can expect the sellers to step in with a defined risk above the level
to position for another drop into new lows. The buyers, on the other hand, will
want to see the price breaking above the resistance to increase the bullish
bets into the 4300 level.
S&P 500 Technical
Analysis – 1 hour Timeframe
S&P 500 1 hour
On the 1 hour chart, we can see that we have
a divergence with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we should see a pullback into the minor trendline
where we can also find the confluence with the 38.2% Fibonacci retracement
level and the red 21 moving average. If the price break above the trendline,
the buyers will increase the bullish bets into the resistance around the 4200
level.
Upcoming Events
This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Tomorrow, we have the US
Employment Cost Index and the Consumer Confidence report. On Wednesday, it will
be the time for the US ADP, the ISM Manufacturing PMI and the FOMC rate
decision. On Thursday we will get the US Jobless Claims data, while on Friday
we conclude the week with the US NFP report and the ISM Services PMI.