SP500 Attacks Critical Resistance

US economy enters recession with a solid labor market

The “excellent” employment report released on Friday reduced recession worries while raising the likelihood that the Federal Reserve will step up its efforts to control inflation. However, a 50 basis-point rate rise isn’t the only option on the table for the upcoming meeting, according to San Francisco Fed President Mary Daly, who stated over the weekend that the central bank is “far from done yet” in driving down prices.

In the meantime, the SP500 index has increased by more than 6% over the last four weeks, nearing the level of two standard deviations for data dating back 30 years, according to Bloomberg.

This week, the crucial Consumer Price Index (CPI), the Producer Price Index (PPI), and unit labor costs, a measure of total salaries given to employees, will provide investors with three significant inflation readings.

Bloomberg surveyed economists who predicted that the broadest measure of CPI would increase by 8.7% in July, which would be a tiny decrease from June’s 9.1% increase. The CPI is predicted to rise by 0.2% during the course of the month, up from 1.3% the previous month.

Key resistance ahead

If the price breaks above the horizontal selling zone of 4,200 USD, the medium-term outlook could change to bullish, likely targeting the 4,300 USD zone, where previous swing highs are aligned with the 200-day moving average. The rally looks solid, despite several bearish factors influencing the markets.

Alternatively, the short-term support appears at 4,100 USD and as long as the index trades above it, the short-term trend remains bullish.