S&P 500 extends losses as hot NFP raises rate hike odds; eyes on the US CPI next

FUNDAMENTAL OVERVIEW The S&P 500 erased some of its Thursday’s gains as the US NFP reporton Friday showed job growth in August almost tripling the consensus estimate of 56K. This triggered a hawkish repricing in interest rates expectations, with the odds for a September hike jumping back to roughly 58%. This week is all about the US CPI data. Unless, we get some surprising breakthrough in US-Iran relations, the price action will likely remain mostly rangebound or a bit negative as traders at some point might start hedging into the CPI release. Moreover, there's still some room to erase the Waller-driven gains, so the sellers should remain in control into the CPI.A soft or in-line CPI will likely give the S&P 500 a boost as Fed’s Waller mentioned that he won’t consider a rate hike unless we get a hot CPI. Conversely, an upside surprise in core monthly inflation data will likely trigger a selloff on further hawkish repricing. S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can see that the S&P 500 eventually bounced around the 7,640 support and erased almost all the Warsh-driven losses. If we get another pullback into the support, we can expect the buyers to step in with a defined risk below the support to position for a rally into new record highs. The sellers, on the other hand, will want to see the price breaking lower to pile in for a drop into the bottom trendline around the 7,400 level. S&P 500 TECHNICAL ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we can see the price rejected the downward trendline as the hot NFP report pushed rate hike odds back higher, with traders now waiting for the US CPI as the ultimate confirmation. If we get a pullback into the trendline, we can expect the sellers to lean on it with a defined risk above it to position for a drop into the 7,640 support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new record highs. S&P 500 TECHNICAL ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, we have a minor support zone around the 7,710 level where the bearish momentum waned and the price consolidated. The sellers will want to see the price breaking below the support extend the drop into the 7,640 support next. The red lines define the average daily range for today. UPCOMING CATALYSTSOn Thursday, we get the US PPI report and the US Jobless Claims figures. On Friday, we conclude the week with the US CPI report. This article was written by Giuseppe Dellamotta at investinglive.com.