Yesterday, the Fed kept interest rates unchanged as expected but that's not what the market was looking for going into the event. The market was focused solely on the Dot Plot and the Fed decided to validate the market's dovish pricing projecting a 2024 year-end peak rate at 4.6%. The expectations were for the Fed to keep two rate cuts for 2024, but the Fed decided to increase that to three, basically agreeing with the market that rate cuts are coming.
Moreover, Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long, which suggests that a rate cut could come pretty soon. This gave a strong boost to the S&P 500 leading to new highs with the sentiment turning heavily bullish.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 broke above the cycle high at the start of the week and surged to new highs yesterday following the Fed’s pivot. It’s hard to trade a straight line that’s been going on since the end of October, but from a risk management perspective, a pullback into the previous cycle high at very least would be welcome development for the buyers.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we now have a trendline if we connect the most recent swing lows. This makes the 4605 level a good support as we have also the confluence with the trendline and the red 21 moving average. This is where the buyers should step in with a defined risk below the support and position for another rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to pile in and target a drop into the 4540 level.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the strong push to the upside from yesterday’s Fed decision. On this timeframe, we have also the Fibonacci retracement levels coming right into the support level adding some extra confluence.
Upcoming Events
Today we will see the latest US Retail Sales and Jobless Claims figures, while tomorrow we conclude the week with the US PMIs.
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