Embarking on its third consecutive day in the green, the S&P 500 futures (CME: ES) surged forward on Thursday, riding the wave of newfound data that embraces a cooling US economy. As the stage is illuminated with the latest revelations in GDP growth figures and captivating insights into the inflationary position and labour market, the US market reacted to reduced expectations for a November rate hike. Yet, a shroud of anticipation envelops the scene, awaiting the grand unveiling of the thrilling saga of the Non-Farm Payroll report, set to unfold tomorrow.
The recent developments in the US economy reveal a captivating tale as quarterly GDP growth defied expectations with a sprightly 2.1% expansion, surpassing the preceding 2% print while falling short of the anticipated 2.4% expansion. Echoing the whispers of Tuesday’s gentle JOLTs data, traders yearned for confirmation of a softening labour market from the ADP employment change, which echoed a similar narrative. A measly 177K jobs were created in the latest period under question, a departure from the former 371K surge and gracefully slipping beneath the consensus of 195K. However, the Core PCE Index failed to deliver a downside surprise, as price pressures in the economy remain sticky. Coming in at 4.2%, the figure ticked up from the prior 4.1% but remained in line with consensus, preventing an adverse reaction from the market. All eyes will now turn to the NFP report tomorrow to round off an eventful week in the US market.
Technical
On the 4H chart, the recent bullish momentum has formed an ascending channel, with the market facing stern resistance at 4,538.00 (R1). With the PCE data failing to spur a positive reaction to break through this resistance, a pullback may well be on the cards.
With volumes deteriorating in the uptrend, there may be exhaustion at the top of the trend leading up to the NFP release. The RSI points to overbought conditions, which may entice sellers to enter the market. If resistance at R1 holds sustainably, the daily pivot point at 4,517.00 could be tested at the dynamic support of the channel, where a breakdown could lead sellers toward lower support at 4,503.50 (S1). From there, a demand zone is within reach at the Fibonacci midpoint at 4,490.50 from the late-August bottom and 4,482.00, which could be potential levels of interest in the upcoming sessions.
However, a break above R1 could catalyze a continuation of the uptrend toward higher resistance at 4,566.50. If volumes improve following the breakout, the market could look toward 4,597.50 if the NFP supports a sustained uptrend in the week’s closing session.
Summary
With a wide range of economic indicators released this week, traders have been reacting to a softening US economy as the greenback retreated to the benefit of the futures market on lower expectations for an additional rate hike in November. However, the bullish momentum shows signs of hesitation at 4,538.00 ahead of the highly anticipated NFP release tomorrow.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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