S&P Poised for Fireworks?

The S&P is on watch through the remainder of the week as traders wait to see if Fe chair Powell can light a fire under risk assets tomorrow. Delivering his final speech as Fed chairman at the Jackson Hole symposium tomorrow, traders are anticipating an easing signal for next month on the back of the recent downward revisions in labour market data. If delivered, particularly if Powell takes a more stridently dovish tone, lifting chances of a further cut before year end, the S&P stands to breakout to fresh, record highs ahead of the weekend with USD set to drop firmly.  However, if Powell takes a more neutral tone, acknowledging the weakness in jobs data but dwelling on lingering inflation uncertainty, this could cause some pullback in equities as USD squeezes higher.

Stocks Rebound Following Tech-Led Dip

Yesterday the S&P fell sharply as traders scaled back long positions amidst a sharp sell of in tech stocks. The tech sector came under pressure amidst concerns over inflated valuations and the prospect of an AI bubble on the back of comments from Open AI CEO Sam Altman. Big names in the AI space, such as Nvidia, fell heavily before rebounding of the session lows. Indeed, the S&P itself managed to recover off session lows to end the day only just in the red. Looking ahead, the stage is now set for plenty of volatility tomorrow with either a breakout to fresh highs coming, or a sharp drop lower, depending on what we hear from Powell.

Technical Views

S&P

The correction lower in the market found support yesterday into a fresh test of the bull channel lows. While that area holds, focus is on a continue move higher and a breakout above 6,428.95 to fresh highs. While below that resistance level, however, risks of a deeper correction towards the 6,214.02 are still a key threat, particularly given weaker momentum studies readings.