FundamentalOverview
At one point it looked like the worst was behind us as the S&P 500 ralliedalmost 3% on a single day following the BoJ and FOMC decisions.Unfortunately, the following day we got an ugly US ISM Manufacturing PMI which sent the marketinto risk-off and defensive positioning into the US NFP report.
The US Jobs report didn’t help as the datasurprised to the downside with unemployment jumping to a totally unexpected4.3% rate. The losses extended and eventually we got a strong overnight sellofftoday due to spillover effects as the Nikkei crashed 12% in a single day.
The market is now pricing in 125 bps of easing by year-end which translatesinto a 50 bps cut in both September and November, and a 25 bps cut in December.The market is even seeing small chances of an inter-meeting cut. Things aremoving quickly.
S&P 500Technical Analysis – Daily Timeframe
On the daily chart, we cansee that the S&P 500 broke through the major trendline around the 5435 level where we hadalso the 38.2% Fibonacci retracement level for confluence. The sellers piled in moreaggressively as the buyers folded. We are now seeing a bounce on a previousswing low level around the 5200 level.
This is where we can expectthe buyers to step in with a defined risk below the level to position for arally into the 5400 level. The sellers, on the other hand, will want to see theprice breaking lower to increase the bearish bets into the 5000 level next.
S&P 500 TechnicalAnalysis – 4 hour Timeframe
On the 1 hour chart, we cansee that we have a minor downward trendline defining the current bearishmomentum. The buyers will want to see the price breaking higher to increase thebullish bets into the 5400 level, while the sellers will likely keep on leaningon it to position for a break below the 5200 level. The red lines define the average daily range for today.
UpcomingCatalysts
This week is basically empty on the data front. Today we have the US ISM ServicesPMI and on Thursday we get the latest US Jobless Claims figures. The marketwill also pay close attention to Fed members’ comments given the latestdevelopments.
