Sunday, September 11, 2016

S&P 500 Weekly Catalysts And Direction: Cracked

See Full Report
*Chance for a rate hike is still not priced into markets.
*If it is there could be more downside.
*Important events this week could shape that.

Quick Review
On August 25th we called the S&P 500 "Breaking Down As The Brexit Story Changes." On August 31st we said "S&P 500 Showing Cracks Ahead Of Jobs Number." In last week's S&P 500 Weekly we said the following:
"The market's knee-jerk reaction on Friday expected less chance for a rate hike. That said Fed Funds futures were little changed. Markets need some Fed guidance. If Fed guidance shows a rate hike is still being considered we'd expect markets to take a hit."
As a follow up we warned that hawks were speaking on Wednesday.
Friday morning we showed that Fed officials likely think the economy is picking up based on the Beige Book which would imply a rate hike is still in the cards for September 21st.
What culminated a week after non-farm payrolls ("NFP") was a market breakdown based on two main factors: 1) a weaker economy and 2) despite that a chance for a rate hike.
With that we saw fundamentals match technicals as the markets sold off.
Let's first look at the chart we pointed out August 25th and 31st.
Source: Interactive Brokers
In the two reports about S&P 500 (NYSEARCA:SPY) technicals we said, "If the market were to close below 217.68, it is likely a confirmation that the story has changed."
The market did close below that point several times which meant to us the market may have been breaking down on a technical basis.
Fundamental Factors That Broke The Market Down
Weak jobs:
While this was a week ago jobs are the most important...

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