US Market Technicals Ahead (4 October – 8 October 2021)

Data released last Friday reflects a faster pace of growth than expected in September for US Manufacturing and ISM Manufacturing PMIs. However, it’s likely that investor focus will return to worries about inflation , along with Federal Reserve tightening on the horizon.

This Friday’s monthly US employment report will be adding to the potential market jitters, which will probably show job growth acceleration in September even with raised concerns about the rising COVID-19 cases. Although Fed Chair Powell has tried to distance policy from any single labor market metric in the past, he has clearly identified the incoming nonfarm payroll report as a key to the tapering decision at his press conference following the September meeting.

Markets are also still contending with ongoing worries about China’s Evergrande Group (HK:3333), as the giant real estate developer continues to struggle with its massive debt overload. In short, there are a plethora of themes that could pressure markets as the first full week of October trading commences.

Here is what you need to know to start your week.

S&P500 (US Market)
The benchmark index $SPX ended the final week of September with a weekly loss of -2.15% (-95.9 points), with its trading volume reaching a pinnacle that was last observed in early May this year.

The past month of trading session have established several signs of fatigue in this tech driven rally;

$SPX Short Term MA Crossover of 20 Days and 50 Days (technically known as ‘Death Cross’), last observed on 30th September 2020
$SPX multi-month long uptrend channel violation, observation of first lower high and lower low established below 20D and 50D MA over the period
Up-Down Volume ratio is significantly much lesser than 1.0 over the past 30 days average (A ratio greater than 1.0 shows more volume on the upside than on the downside. A reading under 1.0 shows sellers have the upper hand.)
With $SPX currently trading below its short term major MAs, it is important to remain risk adverse and diligent
The immediate support to watch for $SPX this week is at 4,270 immediate support level . A breakdown of 4,270 support level would point to further weakness for the month of October, which is considered to be a time when stocks historically decline, giving rise to the term the ‘October Effect.’