Jump to content

S&P 500 Subdued on Fast and Furious Fed Tightening Roadmap, NFP Eyed for Direction

Recommended Posts


  • The S&P 500 fails to rebound and posts a small loss amid cautious sentiment on Wall Street following the FOMC hawkish minutes
  • All eyes will be on the U.S. employment report (NFP) on Friday
  • Strong labor market data may trigger a temporary pullback in risk assets as it may reinforce the narrative the economy is well-positioned to withstand aggressive policy normalization
S&P 500 Subdued on Fast and Furious Fed Tightening Roadmap, NFP Eyed for  Direction

Most read: Dow Jones, S&P 500, Nasdaq 100 Forecast - Pullback Testing Resolve

U.S. stocks failed to recover and finished marginally lower on Thursday amid cautious sentiment among investors following the large sell-off on the previous day. At the market close, the S&P 500 fell 0.10% to 4,696, after fluctuating between small gains and losses for most of the session. The Nasdaq 100 also posted a modest decline, retreating 0.04% to 15,765 amid higher Treasury yields. Elsewhere, the economically sensitive Dow Jones underperformed the major averages, dropping 0.47% to 36,236, dragged down by weaker than expected Services ISM, which printed at 62, well below the median forecast of 67.5.

During the trading session, the mood on Wall Street remained somewhat jittery after the December FOMC minutes, released Wednesday afternoon, flagged the chance of earlier interest rates hikes and signaled it may be appropriate to begin trimming bond holdings soon post-liftoff. The aggressive tightening cycle being considered by the Federal Reserve is a recipe for volatility and may become a significant headwind for stocks, particularly those with stretched valuations in the growth space.

Looking ahead, all eyes will be on the December nonfarm payrolls data due Friday morning. Consensus expectations suggest that the US economy created 400,000 new jobs, but the results could surprise to the upside after the ADP report showed that the private sector hired at a breakneck pace, adding 807,000 workers last month. A solid NFP print, while fundamentally a good outcome for the economy, could trigger a transitory bearish reaction in risk assets as it would endorse the Fed’s argument that the labor market is recovering energetically and is sufficiently strong to withstand multiple rate hikes and quantitative tightening (via balance sheet runoff).


With the passage of time, bonds in the Fed’s portfolio will inevitably become due at different intervals. At maturity, the central bank will reinvest repayments of principal to keep its holdings constant while on easing mode. However, once balance sheet normalization begins, the bank will cease to reinvest some or all maturing securities to reduce its assets, a process known as quantitative tightening. Quantitative tightening, which is being entertained by Fed officials, drains liquidity from the system and can, therefore, become a negative catalyst for equities, especially if investors begin to price a “policy error” caused by a premature pullback of accommodation. In any case, to better understand what policymakers will do in terms of monetary policy, traders should closely follow Fed speak in coming days and macro data. Much insight can be gained from central bank language and economic reports.


After breaking below the 4,735 floor, the S&P 500 accelerated its retreat, but was repelled by the 50-day moving average. Despite this rejection, the technical signals remain slightly bearish in the very short term, but if the index manages to reclaim the 4,735 area, now resistance based on the polarity principle, we could see a test of the all-time high near 4,818 within days. On the flip side, if sellers resurface and push the price below the 50-day SMA, the 4,630 zone will become the immediate downside focus.


S&P 500 Subdued on Fast and Furious Fed Tightening Roadmap, NFP Eyed for Direction

S&P 500 (SPX) Chart by TradingView


  • Are you just getting started? Download the beginners’ guide for FX traders
  • Would you like to know more about your trading personality? Take the DailyFX quiz and find out
  • IG's client positioning data provides valuable information on market sentiment. Get your free guide on how to use this powerful trading indicator here.

Written by Diego Colman, Contributor, 7th Jan 2022. DailyFX

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Crypto enthusiasts seeking high returns on their digital assets should look no further than Bitget's innovative PoolX event. This platform offers a unique opportunity to earn attractive APRs by pooling liquidity for various projects, providing participants with a chance to diversify their portfolios and maximize their earnings. In May 2024, Bitget PoolX witnessed impressive APRs across multiple projects. The image shows that USDT APR soared to 75.48%, while BTC and ETH APRs stood at 35.09% and 31.46%, respectively. These remarkable figures highlight the potential for substantial returns through PoolX participation. Other notable projects included ONG APR at 25.76%, NYAN APR at 22.25%, and APU APR at 16.61%. Even lower-ranking projects like DAOT, HODL, KATT, WSDM, and UDS offered respectable APRs, ranging from 14.9% to 12.73%. The success of the exchange PoolX lies in its ability to facilitate liquidity provision for various projects, allowing participants to earn rewards in the form of attractive APRs. By contributing liquidity to these pools, users not only support the growth of promising projects but also benefit from the potential upside as these projects gain traction and popularity. Looking ahead, the exchange PoolX is gearing up to introduce even more exciting projects in the coming months. Participants can expect a diverse range of opportunities, spanning various sectors and use cases within the crypto ecosystem. By staying up-to-date with the platform announcements and participating in these upcoming pools, users can position themselves to maximize their earnings and capitalize on the rapidly evolving crypto landscape.  
    • Wheat Elliott Wave Analysis Function - Counter Trend Mode - Corrective Structure -Zigzag for wave (B) Position - Wave A of (B) Direction - Wave A is still in play Details -  As it appears the decline from 720’4 will most likely continue lower, we have adjusted the previous count. Price is now very likely in wave A of (B) against the 523’6 low. Wheat Elliott Wave Analysis Since late May, wheat has declined over 14% from 720, indicating that the commodity has retraced approximately half of the impulse rally that occurred between March 11th and May 28th. In the medium term, the move from March 11th remains a positive correction of the long-term bearish trend that spanned from March 2022 to March 2024—a two-year trend.   Daily Chart Analysis: On the daily chart, wheat completed a bearish impulse wave from March 2022 at 523’6 in March 2024. Following this trend, a corrective phase was anticipated in the opposite direction. The impulse reaction that concluded wave (A) at the May 2024 peak is part of this larger bullish correction. Given that wave (A) is an impulse, we can expect at least a zigzag structure or possibly a double zigzag if the bullish correction extends over several months. Following the path of least resistance, a simple zigzag structure—wave (A)-(B)-(C)—is highly probable. Currently, the price is correcting wave (A) downwards in wave (B). Provided that the ongoing decline stays above 523’6, an extension higher is expected. However, wave (B) does not appear to be finished yet, as evident from the H4 chart.   H4 Chart Analysis: On the H4 chart, the price seems to be in wave A of (B), which is evolving into an impulse structure. We anticipate a typical zigzag structure for wave (B). The invalidation level at 523’6 should not be breached. If it is, the long-term bearish trend from March 2022 will likely resume, confirming that the bullish correction from March 2024 has concluded.   Summary: Wheat has seen a significant decline since late May, retracing half of its recent impulse rally. The medium-term trend from March 11th remains a positive correction within the context of a long-term bearish trend that lasted two years. On the daily chart, the completion of the bearish impulse wave in March 2024 was followed by a bullish correction, which is currently in wave (B) of a zigzag structure. The H4 chart suggests that wave A of (B) is forming an impulse structure, with expectations of a typical zigzag correction.   Traders should monitor the key level of 523’6. If this level holds, the bullish correction is likely to continue with a potential extension higher. However, a breach below 523’6 would invalidate this scenario, signaling a continuation of the long-term bearish trend.  Technical Analyst : Sanmi Adeagbo Source : Tradinglounge.com get trial here!  
    • ZkSync leverages zero-knowledge proofs to improve Ethereum's scalability, offering faster transactions with lower fees. Its use of zkRollups positions it as a promising solution for decentralized applications and DeFi platforms. On Bitget, traders can engage with ZkSync, taking advantage of the exchange's features like a user-friendly interface and robust security measures. While ZkSync presents an opportunity for growth, it's important for investors to conduct thorough research and consider the project's long-term potential in the evolving crypto landscape.
  • Create New...