S&P 500 – Talking Points
- S&P 500 fails at key technical moving average as equity weakness continues
- Risk continues to struggle following Jerome Powell’s Jackson Hole remarks
- Traders now look to Friday’s NFP report for clues to September FOMC meeting
US equities erased strong premarket gains as the S&P 500 and Nasdaq 100 both failed to break above their respective 50-day moving averages. Risk has been under pressure this week following Fed Chair Jerome Powell’s comments last Friday from the Jackson Hole Economic Symposium. Minneapolis Fed President Neel Kashkari went one step further than Powell, stating in an interview this week that he was “happy” to see how the markets received Chair Powell’s remarks.
Despite chopping around following the opening bell, the S&P 500 is looking to snap a three session losing streak. As market participants continue to debate whether the US economy is in a recession, attention now turns to Friday’s nonfarm payrolls (NFP) report. Market volatility may be high on Friday given the importance the Fed has put on the labor market recently. As equities have cooled, so has the US Dollar as the ECB mulls a potential 75 basis point rate hike at their next policy meeting.
As mentioned, attention now shifts to Friday’s NFP report. Given the extremely tight nature of the labor market, Friday’s print could go a long way in determining whether the Fed goes 50 basis points (bps) or 75 bps at the September meeting. While there is another CPI print between now and then, the Fed could cool it’s tightening path should the labor market show signs of material weakness.
A reset of policy bets could see rate markets swing violently, which could bleed into equities. Should traders increase bets that the Fed will only go 50 bps, a cooling of US Treasury yields could offer a short-term boost for stocks. However, equities will also need to digest growing geopolitical tensions between China and Taiwan and weakness throughout Europe.
US Economic Calendar
Courtesy of DailyFX Economic Calendar
The S&P 500 along with the Nasdaq 100 both remain penned in by their respective 50-day moving averages. With such significant overhead resistance, the balance of risks remains skewed to the downside. Despite there being such a bearish tone to markets this week, support at 3980 has largely held as traders may be sitting on the sidelines ahead of NFPs. Should any upside moves materialize, initial resistance around 4122 may come into play given its nature as a prior zone of support. Having already broken through psychological support at 4000, traders may look to 3920 and 3900 as clear downside targets.
S&P 500 Futures (ES) 1 Hour Chart
Chart created with TradingView
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— Written by Brendan Fagan
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