The S&P 500 rallied
yesterday after Al-Arabiya reported that Qatar and Pakistan presented a
compromise proposal that could pave the way for an agreement, but the bullish momentum
faded after a diplomat involved in the talks subsequently pushed back against
reports that a deal was close.
Despite the pushback, the
market didn’t erase the gains as hopes for a breakthrough before the midterm
elections grew given the recent increase in positive headlines. A deal would probably
send the S&P 500 to new all-time highs on easing inflation and rate hike
concerns, and improving growth prospects. A prolonged stalemate, on the other
hand, might keep the upside limited.
This week, we have also the
US Flash PMIs on Friday. The data will likely be important in light of the growing
concerns about the economic outlook. Credit spreads continue to widen, and the
Federal Reserve is forced to keep a hawkish bias amid higher inflation, so there
are no bullish drivers at the moment.
If the data
disappoints, growth concerns will likely increase, and we could see another
selloff in the S&P 500. Better than expected data, on the other hand, might
lead to a relief rally in the short-term but it wouldn’t change the bigger
picture as it would just reinforce the need for rate hikes.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see that
the S&P 500(CFD contract) is testing the broken trendline. The sellers will
likely pile in around these levels, with a defined risk above the trendline, to
position for a drop into the 7,500 level, with the 7,613 level as the first
target. The buyers, on the other hand, will want to see the price rising back
above the trendline to start positioning for a rally into new record highs.
S&P 500
TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, we have a
resistance zone around the 7,760 level. That’s where we can expect the sellers
to step in, with a defined risk above the resistance, to position for new lows.
The buyers, on the other hand, will look for a break higher to pile in for a
rally into new highs.
S&P 500 TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we
have a minor upward trendline defining the recent pullback. If the price falls into
the trendline, we can expect the buyers to lean on it, with a defined risk
below it, to target a break above the resistance. The sellers, on the other hand,
will look for a break lower to increase the bearish bets into new lows. The red
lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow we get the latest US
Jobless Claims figures, while on Friday we conclude the week with the US Flash
PMIs.
This article was written by Giuseppe Dellamotta at investinglive.com.