We keep hearing from many Fed members that they are waiting for more data to decide how much more they should tighten. In fact, although the majority of them expects two more rate hikes this year, they keep repeating that these decisions are conditional to the data. Fed Chair Powell repeated again yesterday that the economy is still resilient and that he doesn’t exclude two consecutive rate hikes if the strength in the labour market persists.
The data we got after the last FOMC meeting reinforces the idea that we will indeed see more rate hikes as the housing market data surprised to the upside, the US Jobless Claims remain solid, the US Services PMI remain in expansion and the latest Consumer Confidence report was very strong. A lot will of course depend on the next NFP and CPI reports, but if we keep getting such good data, the Fed will indeed raise rates two more times instead of just one in July as the market currently expects.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that as the S&P 500 reached the 4494 high, it started to pull back from its incredibly strong rally since the beginning of June. A good support level would be the 4323 resistance turned support where we can also find the 38.2% Fibonacci retracement level. That’s where we should expect strong buyers stepping in with a defined risk below the level to target a new high.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has recently bounced on the previous swing low level at 4380 and rallied back into a swing high resistance where there’s also the 50% Fibonacci retracement level. The price is now getting rejected from that resistance and we may see another leg lower into the 4324 support.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely how the price has bounced from the 4380 level, broke above the swing high at 4400 and extended towards the next swing high at 4427 where it found resistance. We can also notice that the last push to the resistance was diverging with the MACD, which should be a sign that the momentum to the upside is weak. The price is now stuck in a mini range between 4400 and 4427. We now have two different scenarios that may play out:
- If the price breaks to the upside, we should see the buyers piling in and extend the rally to a new high.
- If the price breaks lower, we can expect more sellers jumping onboard to extend the fall into the 4324 support.
The risk events ahead are the US Jobless Claims today and the US PCE report tomorrow. The market has been reacting positively to good labour market data and benign inflation reports, so we may expect the same reaction if we get such results. On the other hand, bad labour market data may bring some recession fears and send the market lower.
See also the video below:
