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Last
week, the US CPI came
basically in line with expectations, but the good news is that the Core M/M
reading once again printed at 0.2% or 0.16% unrounded. The not so good news is
that the US Initial Claims spiked
higher coming at 248K vs. 230K expected, but Continuing Claims remained strong.
We have already seen Claims spiking higher in the past months, but the overall
picture remains positive for now. The long-term inflation expectations in the University of Michigan report
ticked lower, so on the data side the week was positive. Nonetheless, the
S&P 500 finished the week negative and it’s hard to find a clear reason
other than a technical pullback or global growth worries.

S&P 500 Technical
Analysis – Daily Timeframe

S&P 500 Daily

On the daily chart, we can see that we had a divergence with the
MACD as the
S&P 500 was approaching the key resistance at 4628.
This is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might be seeing a pullback into the trendline where we
can also find the 38.2% Fibonacci retracement level.
This is where the buyers should step in to target again the 4628 resistance and
ultimately a breakout. The sellers, on the other hand, will want to see the
price breaking lower to pile in even more aggressively and extend the selloff
into the 4324 support.

S&P 500 Technical
Analysis – 4 hour Timeframe

S&P 500 4 hour

On the 4 hour chart, we can see that the S&P
500 broke below a key support zone, retested it and continued lower. The price
action though has been choppy, and the bearish momentum has been weakening as
we can see from the divergence with the MACD. We are also getting closer to the
trendline, so this might be a sign that the market may turn around soon,
especially if we get a positive catalyst.

S&P 500 Technical
Analysis – 1 hour Timeframe

S&P 500 1 hour

On the 1 hour chart, we can see that from
a risk management perspective, the sellers will have two different options
where to sell from:

  • The first level will be the 4494 support
    where we can also find the confluence with
    the 38.2% Fibonacci retracement level.
  • The second level will the downward
    trendline where we can find the 61.8% Fibonacci retracement level.

The buyers, on the other hand, are likely
to pile in at every break higher, but the best level where to buy from would be
the upward trendline near the 4420 level.

Upcoming Events

This week is a
bit bare on the data front and the lower summer liquidity might trigger false
moves. On Tuesday we will see the latest US Retail Sales report where the
market is likely to react positively in case of a beat and negatively in case
of a miss. The US Jobless Claims on Thursday is likely to be the main event of
the week as another big miss may cause recessionary fears and weaken the market
even more, while strong data should give the S&P 500 some support.

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