The recent strong statements from Fed Chair Powell, along with weaker Non-Farm Payrolls (NFP) data, caused the S&P 500 to drop. Although the disappointing NFP numbers affected growth outlooks, the index bounced back after Fed’s Williams suggested some flexibility for the upcoming September meeting. Now, the market is expecting 58 basis points of easing by the end of the year, an increase from the previous 35 basis points before the NFP data. Lower inflation numbers from the ISM Manufacturing and University of Michigan reports could help the stock market. The upcoming ISM Services PMI and Jobless Claims data are likely to affect market trends. If jobless claims are positive and inflation remains low, the S&P 500 could reach new highs, as the market looks forward to possible rate cuts in September during the Jackson Hole Symposium.

Technical Analysis Of The SP500

The daily chart for the S&P 500 shows a dip after Powell’s comments and the NFP report. Buyers may enter around the 6,170 support level for another upward swing, while sellers are aiming to break below it to target 5,800. On the 4-hour chart, buyers took advantage of a setup near 6,241, but sellers need to push below this point to strengthen their positions. The 1-hour chart highlights a possible double bottom around 6,295, which buyers may leverage to push prices up, but sellers are looking for a breakout lower. The latest Non-Farm Payroll report from Friday, August 1st, was weaker than expected, affecting market sentiment. The S&P 500 fell after the news and some cautious remarks from the Fed. However, this dip appears more like a healthy correction rather than the start of a significant decline. The market quickly adjusted its expectations, now forecasting over half a point of rate cuts from the Federal Reserve by the end of the year. This is backed by the CPI report from mid-July, indicating inflation has cooled to 2.8%. These conditions generally favor stocks in the near future. For those looking to capitalize on a rebound, buying near-term call options on the S&P 500 seems smart. The 6,241 level is a strong support, offering a clear entry point for bullish bets. Consider choosing strikes above this level, targeting a rise toward new highs later in August.

Market Sentiment And Strategies

However, we need to be careful ahead of tomorrow’s ISM Services report and Thursday’s Jobless Claims. Stronger-than-expected data could dampen the market’s hopes for rate cuts and push stocks lower. With the VIX currently low at 14, it’s not overly costly to buy some protection. If the price falls below the key upward trendline around 6,241, it could signal that this dip is turning into a correction. In such a case, buying put options or setting up bear put spreads would be a smart way to take advantage of a potential drop toward the 6,170 support level. This approach offers a clear risk management strategy if the bullish mood fades. Create your live VT Markets account and start trading now.

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