Fundamental
Overview
The S&P 500 sold off
pretty aggressively on Friday following the weak US
Flash Services PMI and later the Final UMich Consumer Sentiment survey
where the long-term
inflation expectations jumped to a new 30-year high.
The bulk of the selloff
came after the jump in the long-term inflation expectations. The market might
be fearing that in case we get a slowdown, the Fed might not be fast enough in
cutting rates amid inflation remaining above target and uncomfortably high long-term
inflation expectations.
Of course, one single data
point might not be enough to get a bigger correction in the stock market, especially
since it’s from the University of Michigan survey and since we are about to see
a tick lower in the Core PCE Y/Y rate to 2.6% on Friday.
Nonetheless, this is
something to keep in mind in light of the next NFP and CPI reports coming out
before the March FOMC decision where we will also get the updated SEP and Dot
Plot.
S&P 500
Technical Analysis – Daily Timeframe
S&P 500 Daily
On the daily chart, we can
see that the S&P 500 pulled back from the all-time highs following a couple
of negative data. The sellers will likely continue to push into the closest support
around the 5960 level, while the buyers will look to buy the dip around those
levels to position for a rally back into the all-time highs.
S&P 500 Technical
Analysis – 4 hour Timeframe
S&P 500 4 hour
On the 4 hour chart, we can
see that after the strong selloff on Friday, the price bounced near the minor
support around the 6020 level as the dip buyers stepped in with a defined risk
below the level to position for a rally back into the highs. The sellers, on
the other hand, will look for a break lower to increase the bearish bets into the
5960 level next.
S&P 500 Technical
Analysis – 1 hour Timeframe
S&P 500 1 hour
On the 1 hour chart, there’s
not much else we can add here as from a risk management perspective, the buyers
will have a better risk to reward setup around the 6020 support to position for
new highs, while the sellers will look for a break lower to extend the drop
into new lows. The red lines define the average daily range for today.
Upcoming
Catalysts
Tomorrow we have the US Consumer Confidence
report. On Thursday, we get the latest US Jobless Claims figures, while on
Friday we conclude the week with the US PCE data.