The S&P500 futures soared by +0.48% on Friday as investors shifted focus to the release of US Labour market data. The Index found near-term support at the 5-week low as bulls rallied ahead of monthly payrolls that are expected to slow down.
The US dollar index was flat at +0.0% to the end of the week as bulls held steadily above the 101.00 level, a yearly low. A failure to hold above that level could underpin fading Fed sentiment. The Fed delivered a 25bps as the market expected on Wednesday pushing the dollar lower while giving room for S&P500 index bulls a lift.
However, the recent bank failures act as a near-term barrier for S&P500 bulls in the near term. PacWest Bancorp teased an asset sale late Wednesday propelling the market’s banking woes. Better-than-expected Non-farm payrolls could see yields recover ground capping the S&P500 index rally. The US 10-year yields rose by 2.00% towards 3.50%.
Investors should pay close attention to the release of US labour data scheduled for release early New York session ahead of next week’s treasury meetings.
Weekly Chart Analysis
The S&P500 Index plunged to a 5-week low as bulls struggled to break the 4200 level. The index held steadily above the 4075 level as bulls could attempt another rally at the 4320 level. A break above that high could reinforce bullish strength towards the 4600 area. The index broke outside the falling channel suggesting that the price correction found a support level above the 3600 level. The MACD indicator suggests that there is still a possibility for a rally to the upside as Volume bars trade above the 0.000 benchmark level.
However, a failure to hold above the 4075 level could trigger further selling pressure and the next key support level is the 3800 level. The bears could seek lower prices at the 3800 level which coincides with a 2023 low and a 200-day moving average.
The ActivTrader sentimental tool suggests that 57% of retail traders are bullish on the S&P500 Index. Short-term traders could be taking advantage of the 4075 near-term support. Investors are keenly waiting for a release of US labour data, expected to slow down. The Fed delivered 25bps as expected suggesting a peak on the rate cycle and could make a dent in dollar strength.
However, a break below that key support level could invalidate the current outlook. The ADP Non-Farm Employment change for April rose to 296K vs 148K forecasted underpinning strength in the dollar. Furthermore, investors could be risk-averse ahead of the political resolution to the US debt ceiling stimulation giving a lift to the dollar.
Daily chart Analysis
The S&P500 Index bounced off a 1-month low at the 4075-level breaking a 4-day streak of losses. The index held steady above the 4075 level which coincides with a 50-day moving average, a dynamic support level. The further upside, bulls are capped by the 4200 level, the 2023 high. If bulls continue to hold above the current support level, a break above the 4200 level could be in sight.
However, if the index falls below the 50-day moving average, selling pressure could be triggered and near-term targets are at the 4000 psychological level coinciding with a 200-day moving average. A further break below that level could invalidate the current bullish outlook and bears could target 3800, a January 2023 low.