The S&P 500 rally stalls as US-Iran deal gets delayed and the focus shifts to the US CPI report
FUNDAMENTAL OVERVIEW
The strong rally in the S&P 500 has stalled last Wednesday as the US-Iran deal failed to materialise within the expected timeline. Since then, the price action has been mostly rangebound with just softer than expected NFP reportproviding some support.
The data triggered a dovish repricing in interest rate expectations, with the probability of a September rate hike falling to 38%, compared with 54% before the release. Market pricing has normalised since then though, with the probability of a September hike rising back to 48%.
The reason for this whipsaw in expectations is that there was a significant loss of government jobs, which made the report look much softer than it actually was. In fact, the unemployment rate painted a different picture, falling further to 4.1%. Overall, the labour market remains on a better trajectory than it has been over the past three years.
The next major event will be the US CPI report tomorrow. The data will be critical for the September FOMC decision and Fed Chair Warsh’s speech at the Jackson Hole symposium.
A hot report will likely trigger a selloff in the short-term, with traders increasing rate hike bets. A soft report, on the other hand, should reduce further the risk of Fed tightening and give the S&P 500 another boost.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see the S&P 500 stalled around the upper bound of the rising channel as traders await the US CPI report. The sellers will likely continue to step in around these levels with a defined risk above the record high to position for a drop into the lower bound of the channel. The buyers, on the other hand, will want to see the price breaking above the record high to extend the gains into the 8,000 level.
S&P 500 TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the consolidation that started last Wednesday when the US-Iran deal failed to materialise. The soft NFP provided some support due to the dovish repricing, but the US CPI will ultimately decide whether the Fed hikes or not in September.
The swing low around the 7,725 level will likely act as a minor support. If the price gets there, we can expect the buyers to step in with a defined risk below the swing low to keep pushing into new highs. The sellers, on the other hand, will look for a break to extend the drop into the 7,640 support next.
S&P 500 TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the price action will likely remain mostly rangebound into the US CPI release. We could also see some hedging into the data which could result in some weakness. At this point, it’s just about waiting patiently for the data. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we have the US CPI report. On Thursday, we get the US PPI data and the latest US Jobless Claims figures. On Friday, we conclude the week with the US Retail Sales and the University of Michigan Consumer Sentiment report.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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