KEY POINTS:
- US unemployment rate surprises to the upside
- Higher probabilities we see another Fed rate cut sooner than expected
- The stock market remains supported by the Fed’s dovish reaction function
- US CPI coming up tomorrow
FUNDAMENTAL
OVERVIEW
We finally got the most
recent US jobs report yesterday, and the data surprised to the downside. In
fact, despite the headline number slightly beating expectations, the more
important unemployment rate jumped to 4.6% vs 4.4% prior.
There were some positives
as the permanent job losers rate was a bit lower, but the main takeaway is that
the trend remains to the upside and that the unemployment rate was higher than
the Fed’s year-end forecast.
Fed Chair Powell made it
pretty clear in his last press conference that they are more focused on the labour
market weakness, and they can tolerate some higher inflation given the transitory
expectations.
This suggests that we could
see another rate cut sooner than expected. The market might start to price that
in with more conviction if tomorrow’s US CPI data doesn’t overshoot. This should
be supportive for the stock market and we could get the Santa Rally with new
all-time highs before year-end.
S&P 500
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see that
the S&P 500 bounced from the key support zone around the
6800 level.
The buyers stepped in with a defined risk below the support to position
for a rally into a new all-time high.
The sellers will need the price to break below the support to open the
door for a bigger correction back into the October lows.
S&P 500
TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, we can see more
clearly the recent rangebound price action with the downside limited by the 6800
support.
There’s not much we can glean from
this timeframe, but if the price were to come back down to the support, we can
expect the buyers to step in again to keep pushing into new highs.
The sellers, on the other hand, will
need a downside breakout to start targeting the 6541 level next.
S&P 500
TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see that we have a minor resistance around the 6885 level. The sellers will
likely continue to step in there, with a defined risk above the most recent
high, to position for a move back into the 6800 support.
The buyers, on the other hand,
will look for a break higher to increase the bullish bets into a new all-time
high. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow we get the US CPI report.
This article was written by Giuseppe Dellamotta at investinglive.com.
