Fundamental Overview
The S&P 500 rallied into a new all-time high following Trump’s victory and the red sweep as the market started to look forward to bullish drivers like tax cuts and deregulation.
The only bearish reason people were looking at was the rise in Treasury yields. That’s generally bearish only when the Fed is tightening policy not when yields rise on positive growth expectations.
Right now, the Fed’s reaction function is that a strong economy would warrant an earlier pause in the easing cycle and not a tightening. That should still be supportive for the stock market.
If the Fed’s reaction function changes to a potential tightening, then that will likely trigger a big correction in the stock market on expected economic slowdown.
For now, the current pullback looks as something healthy given the very strong rally following Trump’s victory, so the dip-buyers should be happy about it.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 is pulling back to the key support level around the previous all-time high at 5927. This is where we can expect the buyers to step in with a defined risk below the level to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the trendline around the 5800 level.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a 38.2% Fibonacci retracement level standing right around the support level. This should technically strengthen the support and give the buyers a good level where to lean at and protect their stops. The sellers will look for a break lower to increase the bearish momentum into the trendline.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline defining the current pullback. The sellers will likely continue to lean on it to position for new lows, while the buyers will look for a break higher to increase the bullish bets into new highs. The red lines define the average daily range for today
Upcoming Catalysts
Today we conclude the week with the US Retail Sales report.