S&P 500 Forecast: Jobs Beat And AI Chip Rout Pushes Index Lower

AI Gets Hit, Staples Catch a Bid

The main problems causing this decline are NVDA (-4.97%), AVGL (-5.88%), MU (-9.59%), AMD (-9.19%), INTC (-8.34%), CSCO (-5.26%), ORCL (-8.95%), TTD (-6.15%) and TSLA (-5.27%). The NFP beat didn’t help inflation expectations and caused traders to take some gains from their AI chips and AI infrastructure positions (and Tesla). The defensive consumer staples stepped in with PG up 4.02% and KO up 3.93%. Traders got cash flow defensive today.

Chip Sell Off Drags The S&P 500 Index Lower

NFP Displays Strong Jobs

Job numbers came in hot. Perhaps too hot. That’s why we’re seeing red in the markets. The data release was 172K actual versus an 85K forecast, with the prior at 179K. These numbers give the Fed more room to stay tight or even lean hawkish. Yields are pushing higher on these numbers, putting tension on expensive AI and software names. Good news turns markets bad.

Payrolls Beat Keeps Fed Pressure Alive

Rates Are Biting Again

US 10-year yield picked up again with the green Renko bricks taking the rate back above its 21-EMA and 50-SMA. All that’s left now is to flip the negative Supertrend to positive which can happen with a brick close above 4.556%. That would put the US 10 yield in a nice uptrend as positive momentum looks really good. RSI just crossed over 50 with some room to run, making some higher highs and higher lows. The Z-Score SMA as well. There’s room to go as the indicator is very far from overbought levels. This is now looking like a second attempt to get above 4.70%.

10-Year Yield Bounce Pressures Growth Stocks

S&P 500 Index Bulls Put To The Test On Renko

What a head fake! That was a quick about face by the S&P 500 Index. It broke through the 21-EMA, the Supertrend and the 50-SMA almost at the same time. Once the 7,340 pivot low goes then the real support is at the 500-SMA, about 8.50% away. That’s a big move lower if that happens. My bet is a test on the 7,340 with a bit of consolidation before it goes back on its upward move again. The RSI is in the low 40s and the Z-Score SMA is closer to exhaustion with a little more room to move lower. All is not lost. No need to panic.

S&P 500 Renko Pullback Tests 7,450

The Verdict

Current Trend Direction: Bullish

Bias: Positive

Support Levels: 7,240, 6,780, 6,310

Resistance Levels: 8,150, 9,280

Medium Term Path: The VIX is still below 20 although it did spike higher during today’s session to 18. But from a medium term perspective these moves are part of the ebb and flow of the markets. It may look scary now but if you take a step back and look at it from the long term it’s just noise. Nonetheless for the traders who are in the trenches day by day we may want to see some exhaustion in this move before taking any longs. Keep your eyes on the VIX and market breadth. Those are confirmatory signals for the bull move. And first and foremost it is trend direction so let’s see the S&P 500 Index get back above the 21-EMA and 50-SMA and flip the Supertrend to positive.