The S&P500 Futures (CME: ES) have reversed from a near two-month high as fears of a slowdown in the U.S. economy prevailed, following weakness in the labour market and manufacturing sectors.

The manufacturing PMIs hovered near a three-year low, while the labour market surprised the markets with a significant decline in job openings. Traders will have their eyes glued to the labour markets for the remainder of the week, with the Non-Farm Payrolls looming. Today’s Labour Market reports, including the Initial Jobless Claims and Continuing Jobless Claims, surged to 228K and 1823K, respectively, rising to levels last seen in a while and above consensus.

Technical

The S&P500 futures have trended higher following price action moving beyond its 100-day moving average and forming an ascending channel pattern. Support and resistance were established at the 3980.00 and 4168.50 levels, respectively.

Following a rejection of the resistance level, bearish traders could be on the money for a move lower if they commit in high volumes. The next probable level of interest is either the support of the ascending channel pattern or the support formed at the last low of 3980.00.

Alternatively, if downside volumes decline, it could indicate weakening bearish momentum and the possibility of bullish traders outdoing bears. Price action could be redirected toward resistance at the 4168.50 level in this case.

Summary

The softening of the labour market signals a weakening U.S. economy but spells another win for the Federal Reserve as their aim of cooling the economy is in progress. Borrowing costs are unlikely to keep surging as another Fed Rate Hike is now wagered at 37.5%, making it unlikely. Equity valuations will likely find support at the 3980.0 level, while the 4168.50 level is probable.

Sources: Reuters, U.S. Department of Labor, TradingView