Weekly S&P500 Technical Analysis

<p class=“MsoNormal“>Last week the <a target=“_blank“ href=“https://www.forexlive.com/news/us-december-non-farm-payrolls-223k-vs-200k-expected-20230106/“ target=“_blank“ rel=“follow“>NFP
report</a> showed once again that the labour market is tight and resilient, impacting the S&P500.
What caught the market’s attention though was the data on Average Hourly
Earning (i.e. wages). </p><p class=“MsoNormal“>They missed expectations and the
prior numbers were revised downwards. The market interpreted that as a
goldilocks scenario: strong labour market without wage inflation. </p><p class=“MsoNormal“>What followed was totally
unexpected. The <a target=“_blank“ href=“https://www.forexlive.com/news/ism-december-us-services-496-vs-550-expected-20230106/“ target=“_blank“ rel=“follow“>ISM
Services PMI</a> dived into contractionary territory for the first
time since 2 and a half years. This is a leading indicator for the Services
sector, which is about 80% of the US economy. The market rallied even more on
hopes that the Fed would stop rate hikes very soon and start cutting rates
earlier. </p><p class=“MsoNormal“>The market may be underestimating
the Fed’s resolve in keeping conditions tight for longer. </p><p class=“MsoNormal“>In fact, Fed speakers doubled
down on their intention of keeping rates higher for longer after the reports as
their focus is more on the labour market now and they want to see unemployment picking
up before having the confidence in easing monetary conditions. </p><p class=“MsoNormal“>If that doesn’t happen (which is
unlikely), they will probably keep at it until they see the CPI/PCE Y/Y near
their 2% target. In that case though, it would be too late.</p><p class=“MsoNormal“>S&P500 Technical Analysis</p><p class=“MsoCaption“>Daily chart of the S&P500.</p><p class=“MsoNormal“>On the daily chart above, we can
that the price came back to the old <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>support</a> in the 3920-3940 area that now
acts as <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a>. If the price manages to break
that zone, buyers will be in control and target the blue <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“ target=“_blank“ rel=“follow“>trendline</a> or even a breakout higher. </p><p class=“MsoNormal“>If the price gets rejected from
that zone, sellers will regain control and target at least the support at 3800
if not even lower to the October low at 3506.</p><p class=“MsoNormal“>Zooming in to the 1-hour chart,
we can see the rangebound market of the past few weeks. The <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>support</a> is in the 3790-3810 area and the
<a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>resistance</a> is in the 3920-3940 area. We can also see more clearly
the two possible scenarios: </p><p class=“MsoListParagraphCxSpFirst“>·
Break above and run to the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“>trendline</a> in the 4000 price zone.</p><p class=“MsoListParagraphCxSpLast“>·
Fail and fall back to the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“>support</a> in the 3800 price zone. </p><p class=“MsoCaption“>On the 5-minutes chart, we can see that the buying
momentum out of the two economic reports is waning as depicted by the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/“ target=“_blank“ rel=“follow“>divergence</a>
with the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-relative-strength-index-rsi-20220426/“ target=“_blank“ rel=“follow“>RSI</a>.
This may give a higher probability for the 2nd scenario to play out
as the price may not have enough strength to break up.</p>

This article was written by ForexLive at www.forexlive.com.

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