A very robust US labour market data released on Friday shocked equity markets, which had surged in the aftermath of Powell's speech confirming a slower pace of rises in December.
Non-farm payrolls (
USNFP
) came in at 263k, which was significantly higher than the 200k that had been anticipated, and average hourly wages rose 5.1% y/y, well above the 4.6% expected. The job report came as a surprise following an event hosted by the Brookings Institution on Wednesday, at which Powell emphasized the need to slow the pace of rate hikes as early as the December FOMC meeting, therefore solidifying a 50 basis point hike rather than a 75 basis point boost.
The market was overly optimistic about a "Santa rally," spurred by Powell's latest dovish attitude, but may now face a rough two-week road leading up to the next US CPI data and FOMC meeting.
Prior to Friday, 92% of S&P 500 equities were trading above their 50-day moving average, a level that has historically triggered a bearish reversal. Currently, the level has just fallen to 90%, which remains in the top high of the historical range.
During the Friday session, the S&P 500 index encountered fresh bearish pressure at 4,100 levels on Friday, after strongly breaching its 200-day moving average for the first time since April and firmly trading above the 4,000 psychological mark.
The price action had reversed solidly when it met the dynamic resistance, represented by the 2022 trendline. The S&P is currently seeking support near 4,000 points, which coincides with the 38.2% Fibonacci retracement line of the low to high of 2022.
If this level is broken to the downside, there is the potential for a move to 3,800 (23.6% Fibonacci) prior to important data (US CPI) and the FOMC meeting.
Given the expected repricing of Fed rates for 2023 after the NFP reading, and the Fed blackout period, bull efforts to break over 4,100 have fewer probabilities.
Non-farm payrolls (
USNFP
) came in at 263k, which was significantly higher than the 200k that had been anticipated, and average hourly wages rose 5.1% y/y, well above the 4.6% expected. The job report came as a surprise following an event hosted by the Brookings Institution on Wednesday, at which Powell emphasized the need to slow the pace of rate hikes as early as the December FOMC meeting, therefore solidifying a 50 basis point hike rather than a 75 basis point boost. The market was overly optimistic about a "Santa rally," spurred by Powell's latest dovish attitude, but may now face a rough two-week road leading up to the next US CPI data and FOMC meeting.
Prior to Friday, 92% of S&P 500 equities were trading above their 50-day moving average, a level that has historically triggered a bearish reversal. Currently, the level has just fallen to 90%, which remains in the top high of the historical range.
During the Friday session, the S&P 500 index encountered fresh bearish pressure at 4,100 levels on Friday, after strongly breaching its 200-day moving average for the first time since April and firmly trading above the 4,000 psychological mark.
The price action had reversed solidly when it met the dynamic resistance, represented by the 2022 trendline. The S&P is currently seeking support near 4,000 points, which coincides with the 38.2% Fibonacci retracement line of the low to high of 2022.
If this level is broken to the downside, there is the potential for a move to 3,800 (23.6% Fibonacci) prior to important data (US CPI) and the FOMC meeting.
Given the expected repricing of Fed rates for 2023 after the NFP reading, and the Fed blackout period, bull efforts to break over 4,100 have fewer probabilities.