SP 500 Analysis SPX fails to hold strength after NFP

The trading session has not shown a clear recovery in SPX price action. At the moment, the index is posting slight moves of around 0.1%, with no defined direction, despite the release of employment data in the United States.

For now, the behavior seen over the last few sessions continues to highlight a phase of indecision. The index has not managed to recover confidence in a meaningful way in the short term, and this dynamic could remain in place over the next few trading sessions.

Does NFP fail to support confidence?

The key event of the session was the release of the US NFP report, which showed the creation of 57,000 jobs in June, compared with the 114,000 expected. At first, this reading helped reduce some expectations of a more restrictive monetary policy in the United States, as a weaker labor market could limit the possibility of higher rates over the coming months.

However, the data itself is not entirely positive for the equity market. The slowdown in job creation has become more evident since March, and this reading could raise doubts about US economic growth over the next few months. A sustained cooling in employment could affect consumption, limit domestic demand, and put pressure on corporate earnings.

For this reason, the market appears to be assessing a more complex scenario. A less aggressive Federal Reserve may not be enough if, at the same time, the slowdown in employment starts to put economic activity at risk.

In addition, the impact on one of the most relevant substitute markets for equity indices, such as 10-year bonds, has not been favorable either. Despite the NFP data, US bond yields have started to rise again and continue to show an upward slope toward the 4.5% reference area.

This suggests that bond yields remain attractive in the short term, even though weaker employment could point to a less aggressive Federal Reserve over the coming months.

Source: TradingEconomics

Taking all of this into account, the behavior of bonds and concerns about the employment slowdown have not created a fully favorable environment for risk assets such as the S&P 500. This indecision is also visible in the performance of the index’s main components.

Within the top 10 companies in the index, only three have managed to post a positive session: Apple, up 4.7%; Microsoft, up 1.63%; and Amazon, up 0.25%. The other seven companies have recorded negative moves, showing that demand confidence has not stabilized after the employment report.

This behavior is relevant considering that the ten largest companies in the index represent more than 30% of the total weight of the S&P 500. For this reason, recent weakness in most of these names could limit the index’s short-term recovery.

Source: SlickCharts

Overall, the employment report appears to have brought more doubts than confidence to the equity market. If bond yields remain elevated and the employment slowdown continues to gain relevance, SPX could keep struggling to build a stronger recovery. In this scenario, a phase of indecision could continue to dominate over the next few trading sessions.

 

Technical outlook for the S&P 500

Source: StoneX, Tradingview

• The sideways range remains in place: Despite recovery attempts in the SPX, the index has not shown enough strength to break the sideways range that remains between the ceiling near 7,600 points and the floor close to 7,300 points. For now, this remains the most relevant technical structure in the short term. If the buying bias fails to stabilize over the next few sessions, the sideways range could continue to dominate price action.
   
• RSI: The RSI remains close to the 50 level, suggesting a balance between bullish and bearish impulses over the last 14 trading sessions. This behavior reflects a phase of indecision that could remain relevant if the indicator fails to show a clearer short-term direction.
   
• MACD: The MACD shows a similar setup, as the histogram remains close to the 0 level. This reflects balance in the average strength of short-term moving averages and reinforces the possibility of an indecision phase in the index.
   

Key levels:

• 7,600 points – Relevant resistance: Level that coincides with the index’s all-time highs and represents a key psychological barrier within the current chart structure. Sustained moves above this area could reactivate a more dominant buying bias and open the door to a possible short-term bullish extension.
   

• 7,400 points – Nearby barrier: Neutrality zone located in the central part of the sideways range. This level also coincides with the 50-period simple moving average, making it an important short-term reference. If price fails to move far away from this area, neutrality could continue to dominate and extend the sideways range over the next few sessions.
   
• 7,300 points – Key support: Level that corresponds to recent lows and defines the floor of the sideways channel. Sustained declines below this area could activate more consistent selling pressure and push the index below important references, such as the 50-period moving average. This could open the door to a more relevant selling bias over the coming weeks.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25