Yesterday, the Fed left interest rates unchanged as expected with basically no change to the policy statement. Fed Chair Powell repeated once again that they are “proceeding carefully” as the full effects of the policy tightening have yet to be felt.
There were some expectations for him to hint or signal something for the December meeting given that the September Dot Plot showed another rate hike by the end of the year, but Powell instead said that they “have not made any decisions on future meetings” sparking a rally in the S&P 500.
On the data front, yesterday the US Job Openings beat expectations, but the ISM Manufacturing PMI missed by a big margin. The market might be taking this as good news for a relief rally in the short term, but the bulls may want to be careful going forward.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 bounced around the 4100 level and rallied back above the 4194 resistance. The buyers continued to gain confidence at every breakout, increasing the bullish bets into the key trendline and the 61.8% Fibonacci retracement level around the 4300 level. That’s where the sellers are likely to step in more aggressively to position for another selloff into new lows.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a divergence with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we are seeing a pullback into the trendline where the sellers will have a much better risk to reward setup.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we had a divergence on this timeframe as well signalling a pullback into the minor trendline. Since the price managed to break above the trendline, a reversal was confirmed, and more buyers piled in to extend the rally into the 4194 resistance. The price broke above the resistance as well, giving the buyers another reason to increase the bullish bets.
If we get a pullback, the buyers are likely to lean on the 4194 support where we can also find the 38.2% Fibonacci retracement level and the red 21 moving average for confluence. The sellers, on the other hand, will want to see the price breaking below the support to position for a drop into new lows.
Upcoming Events
Today, we have only the US Jobless Claims data, which will be important for the market given the recent weakness in Continuing Claims. Tomorrow, we conclude the week with the US NFP report and the ISM Services PMI.
See the video below
