Yesterday, the Fed left interest rates unchanged at
5.25-5.50% as expected but revised its outlook on the more hawkish side. In
fact, the Fed not only sees another rate hike by the end of the year but also
much less rate cuts in 2024 as they revised it from 4.6% seen in June to 5.1%
now. The macroeconomic projections were also revised higher indicating a
resilient economy. In the press conference Fed Chair Powell
reaffirmed their data dependency and the need to move carefully as they
approach the terminal rate. One thing that caught everyone by surprise is when
asked if he would call the soft landing a baseline expectation now, Powell said
“No, I would not do that”.
S&P 500 Technical
Analysis – Daily Timeframe
S&P 500 Daily
On the daily chart, we can see that after the
week-long consolidation, the S&P 500 eventually broke out of the support defined
by the red 21 moving average and it’s
now targeting the 4328 support. That’s where we can expect the buyers to step
in with a defined risk below the level to position for a rally into the highs.
If the price breaks through the level though, the major upward trendline will be
the next target and probably the last line of defence for the buyers.
S&P 500 Technical
Analysis – 4 hour Timeframe
S&P 500 4 hour
On the 4 hour chart, we can see more closely that
the S&P 500 broke out of a strong support around the 4455 level as we had
the confluence of the
daily moving average, the 50% Fibonacci retracement level
and the previous resistance turned support. This
breakout is meaningful and the chances of further downside from here are very
high.
S&P 500 Technical
Analysis – 1 hour Timeframe
S&P 500 1 hour
On the 1 hour chart, we can see that the
optimal level to short was right at the retest of the broken support. Right now,
the price has already moved and from a risk management perspective it’s never a
good idea to chase the market. If the market pulls back, another opportunity
should be at the minor trendline where the sellers are likely to pile in again
with a defined risk above the 4455 level and target the 4328 support. The
buyers, on the other hand, will need the price to rally back above the 4455
level to invalidate the bearish setup and start targeting new higher highs.
Upcoming Events
The week is drawing to a
close, but we still have a couple of key economic releases ahead. Today, the main event will be the US Jobless Claims
report as the labour market data remains very important for the Fed and the
market. Tomorrow, we will see the latest US PMIs data which is expected to be
market moving.
See also the video below