The S&P500 Futures (CME: ES) charted an impressive sixth consecutive week of gains. This rally soared to a year-to-date high, firmly placing the bulls in charge of the market narrative. Notably, the index now approaches the levels last seen before the interest rate hikes in January 2022, marking a pivotal juncture in its trajectory.
Amidst this rally, the U.S. Nonfarm Payrolls report surpassed expectations, surging to 199K. Surprisingly, rather than prompting caution, this strong labour market data fuelled heavy investment in the index. The robust employment figures were interpreted as a signal of the U.S. economy’s resilience, potentially evading recessionary pressures and hinting at a soft landing.
However, the spotlight intensifies this week with a densely packed economic calendar. Eyes turn to Tuesday’s eagerly awaited U.S. inflation report, followed by the Federal Reserve’s critical interest rate decision on Wednesday. These pivotal events hold the potential to significantly sway the index as traders keenly assess the Fed’s stance in relation to the prevailing inflationary landscape. Market sentiment hinges on these crucial economic indicators, with anticipation rife regarding the Fed’s policy direction amidst inflation concerns.
Technical
The S&P500 Futures has sustained its upward momentum into the new trading week, edging 20 basis points higher on Monday. Its proximity to a 19-week high signals the potential for further gains if the current rally persists. This particular level, at 4637.24, stands as a significant resistance, having previously initiated a downturn earlier this year.
Earlier market trends outlined a descending channel pattern, with the index trading below the 100-day moving average, reflecting a downward trajectory. Nevertheless, a pivotal shift occurred as support materialised around 4122.25 at the channel’s lower boundary, catalysed by a surge in price action from oversold Relative Strength Index conditions.
This turnaround in sentiment steered the index into an upward trajectory, marked by a breakout above the 100-day moving average and descending channel. With the index breaching the 4637.25 resistance, it could signal sustained bullish pressure, potentially eyeing the 4739.50 level, a near two-year high.
Conversely, trading in overbought territory at this level hints at a possible reversal. In such a scenario, if price convergence occurs, the 100-day moving average might act as a short-term downside point of interest.
Summary
The S&P500 Futures exhibits robust bullish momentum, nearing pre-interest rate hike levels, marking a critical phase. Strong labour data fuelled optimism despite an eventful economic calendar ahead. Technical analysis signals the potential for further gains but cautions on overbought conditions, emphasising vigilance amidst pivotal resistance levels and impending economic data releases.
Sources: U.S. Bureau of Labor Statistics, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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