S&P Holding Support…For Now
The sell-off in the S&P has paused today with the market currently finding support into the 5,885.95 level. The index remains down from the December ATH amidst a resurgent USD amidst a shift in traders’ outlook on the Fed. Yesterday’s FOMC minutes confirmed the hawkish bias to December’s meeting with Fed policymakers agreeing to slow the pace of easing given solid growth and fresh inflationary risks. The market is now not fully pricing a Fed cut until June with CME pricing reflecting a roughly 60% chance of a hold in March.
US Jobs Up Next
Looking ahead, today’s trading will be quiet with the US market offline due to a national day our mourning for former president Carter. However, tomorrow’s headline NFP release holds plenty of volatility risk. If we see any upside surprise tomorrow this should see pricing for a hold in March jumping higher, pushing USD higher and leading equities lower.
Market Risks
Given the upside USD risks into the Trump inauguration, the S&P could see sharp correction lower in this scenario. On the other hand, if we see any downside surprise tomorrow, this should see March rate cut chances creeping higher again, fuelling some USD unwind and allowing the S&P to recover some ground. While not the base case scenario, there is some hope for equities bulls given the weaker-than-forecast ADP print yesterday.
Technical Views
S&P
For now, the S&P remains caught between support at 5,885.95 and resistance at 6,021.84 following the downside break of the bull channel. Given the prior bull trend, focus is on a fresh upside push while support holds. If we break lows, however, there is room for a deeper push towards 5,677.97 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.