This week is full of key economic data which will
culminate with the NFP report on Friday. We begin tomorrow with the ISM
Manufacturing PMI and Job Openings and given the recent trends there could be
room for disappointment. Later in the day, we will get the release of the FOMC
Minutes, but it’s not expected to be market-moving given that it’s three weeks
old data. On Thursday, we will have another slate of US labour market data with
the release of the US ADP and Jobless Claims figures. Finally, on Friday, we conclude
the week with the NFP report and the ISM Services PMI.
On the 1 hour chart, we can see more
closely the current price action with the recent fall erasing all the gains
from the Christmas rally. The buyers might want to split their position in half
as the price could bounce either on the lower bound of the channel or the 4700
level, where we have also the 38.2% Fibonacci
retracement level for confluence. The sellers, on the
other hand, will want to see the price breaking below the 4700 level to
position for a drop into the 4548 level.
Upcoming Events
On the 4 hour chart, we can see that the
price has been trading inside a rising channel with the latest leg higher diverging with
the MACD. This
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we should see a pullback into the lower bound of the
channel where the buyers will look to lean onto to position for a rally into
new all-time highs. A break below the channel and the 4700 level would
invalidate the bullish setup and likely trigger a selloff into the 4548 level.
S&P 500 Technical
Analysis – 1 hour Timeframe
Last week, we saw a bit of a Christmas rally in the
S&P 500, although all the gains got erased in the final couple of days. The
market is all-in on the soft-landing trade with the Fed expected to cut
interest rates soon, the labour market coming into better balance and the
inflation rate on track to reach the 2% target by the end of the year. It’s
hard for the bears to fight the current positive sentiment, especially without
significant bearish catalysts, but such crowded trades are generally liable to
fast unwinding in case the prevailing narrative proves to be wrong, so the
bulls should be extra careful going forward.
S&P 500 Technical
Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500
is now roughly 1% away from the all-time high. This is truly incredible if we
think that it happened amid many headwinds like the second most aggressive
tightening in history and geopolitical attritions. From a risk management
perspective, the buyers would be better off waiting for a pullback into the
recent swing low around the 4700 level where we can also find the red 21 moving average for confluence.
