S&P 500 Index: More Downside Expected As Upbeat Jobs Data Reaffirms Tapering Talk

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The S&P 500 index has made a slight intraday recovery after the ADP Employment Change for September came in at 568K. This figure was better than the markets had expected, as the consensus was for an additional of 425K private-sector jobs. The number also beat the previous figure of 340K. 

The data shows a recovery in private sector employment, even as more Americans get the COVID-19 vaccines. More than 65% of American adults have received at least one dose of the vaccines, allowing for private business activity to pick up with the attendant rise in hiring. 

However, the overall sentiment on the US markets remains negative, as higher jobs numbers further confirm the Fed’s resolve to start tapering this month. Tapering cuts back on the cheaper trading funds and also raises the prospects of an earlier rate increase lift-off cycle. This action promotes capital flows from stocks to bonds, which could exacerbate the recent selloffs seen in the market.

The S&P 500 index is off intraday lows but still down by 0.55% on the day.

S&P 500 Technical Outlook

The active 4-hour candle has bounced off the 4300.56 support (psychological and 61.8% Fibonacci extension which served as a previous all-time high). This bounce has taken the price to the 4324.44 resistance, which has so far held firm. A further advance takes the price to the 4368.58 barrier, where the descending trendline also forms an additional resistance. Only when these barriers are taken out will 4393.03 and 4422.92 re-emerge as new targets to the north.

On the other hand, if the negative sentiment around US indices persists, any rallies could become selling opportunities. Such moves will ultimately rely on a breakdown of the 4300.56 support to become a reality. This break opens the door towards 4257.90 (50% Fibonacci extension), with 4206.63 and 4166.91 serving as additional targets to the south.

S&P 500 Index: 4-Hour Chart

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