S&P 500 breaks through a major support as hawkish Fed expectations and US-Iran war weigh
FUNDAMENTAL OVERVIEW
The S&P 500, and other major stock indices in general, has been under pressure since Friday after Fed Chair Warsh delivered a hawkish speech at the Jackson Hole Symposium. He leant against the easing in financial conditions, which retightened them quickly. This process has, of course, weighed on the stock market as tighter financial conditions depress future growth expectations. The rate hike probabilities for the September meeting have also increased, with the market now seeing roughly a 67% chance of a hike.
Warsh has also reiterated that the Fed is focused solely on inflation now and mentioned that the progress has been slow. For this reason, I think only a soft US CPI report could bring the probabilities below 50% and deter the Fed from hiking at the upcoming meeting. If the probabilities stay at or above 50%, the Fed might be forced to hike regardless because failure to do so would send a dovish message and ease financial conditions again.
For now, the upside in the S&P 500 is limited by hawkish expectations and the escalation of the US-Iran war. The best-case scenario would be a soft US CPI coupled with a de-escalation in the Middle East. The worst-case scenario, on the other hand, would be a hot CPI without a de-escalation which could send the market to July 30 lows.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that the S&P 500 is breaking through the 7,640 support. We can expect the sellers to pile in on the break with a defined risk above the support to position for a drop into the lower bound of the channel. The buyers, on the other hand, will want to see the price rising back above the support to position for a rally into new record highs.
S&P 500 TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, now that the price made a new low, we have a downward trendline defining the bearish structure. If we get a pullback into the trendline, we can expect the sellers to lean on it with a defined risk above it to position for a drop into the lower bound of the channel. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new all-time highs.
S&P 500 TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor downward trendline defining the bearish momentum on this timeframe. The sellers will likely continue to lean on the trendline with a defined risk above it to keep pushing into new lows, while the buyers will look for a break to position for a pullback into the 4-hour trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we get the US ADP report. Tomorrow, we have Fed’s Waller, the US Jobless Claims and the US ISM Services PMI. On Friday, we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
FX初心者には必須 無料のうちにGET！
