S&P 500 Technical Analysis | Forexlive

We keep
hearing from many Fed members that they are waiting for more data to decide how
much more they should tighten. In fact, although the majority of them expects
two more rate hikes this year, they keep repeating that these decisions are
conditional to the data. Fed Chair Powell repeated
again yesterday that the economy is still resilient and that he doesn’t exclude
two consecutive rate hikes if the strength in the labour market persists.

The data
we got after the last FOMC meeting reinforces the idea that we will indeed see
more rate hikes as the housing market data
surprised to the upside, the US Jobless Claims remain
solid, the US Services PMI remain
in expansion and the latest Consumer Confidence report was very strong. A lot
will of course depend on the next NFP and CPI reports, but if we keep getting
such good data, the Fed will indeed raise rates two more times instead of just
one in July as the market currently expects.

S&P 500 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that as the S&P
500 reached the 4494 high, it started to pull back from its incredibly strong
rally since the beginning of June. A good support level
would be the 4323 resistance turned support where we
can also find the 38.2% Fibonacci retracement level.
That’s where we should expect strong buyers stepping in with a defined risk
below the level to target a new high.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price has
recently bounced on the previous swing low level at 4380 and rallied back into
a swing high resistance where there’s also the 50% Fibonacci retracement level.
The price is now getting rejected from that resistance and we may see another
leg lower into the 4324 support.

S&P 500 Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can see more
closely how the price has bounced from the 4380 level, broke above the swing
high at 4400 and extended towards the next swing high at 4427 where it found
resistance. We can also notice that the last push to the resistance was diverging with
the MACD, which
should be a sign that the momentum to the upside is weak. The price is now
stuck in a mini range between 4400 and 4427. We now have two different
scenarios that may play out:

• If the price breaks to the upside, we
  should see the buyers piling in and extend the rally to a new high.
• If the price breaks lower, we can expect
  more sellers jumping onboard to extend the fall into the 4324 support.

The risk events ahead
are the US Jobless Claims today and the US PCE report tomorrow. The market has
been reacting positively to good labour market data and benign inflation
reports, so we may expect the same reaction if we get such results. On the
other hand, bad labour market data may bring some recession fears and send the
market lower.

See also the video below: