Last week the Fed kept interest rates unchanged as expected while striking a hawkish tone via the Dot Plot. In fact, the Fed not only sees another rate hike by the end of the year, but also much less rate cuts by the end of 2024. Fed Chair Powell has also admitted that the soft-landing scenario is not his base case at the moment and stronger than expected economic data may require additional tightening. For now, the economic data remains strong with Jobless Claims crushing expectations last week, which is not what the Fed wants to see.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 sold off following the FOMC meeting and it’s now testing the key support around the 4328 level. This is where we can expect the buyers to step in with a defined risk below the support to target a rally into the highs. We can also see that the price is a bit overstretched as depicted by the distance from the blue 8 moving average. In such instances, the price generally pulls back to the moving average or consolidates before another impulse.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the key support around the 4328 level and that a break below it would open the door for a fall into the major trendline and the 4194 support. In case of a break lower we can expect even more sellers coming into the market while the buyers will wait around the trendline to buy the dip.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that in case of a bounce on the support, the sellers will have two possible areas where to sell from. The first is around the 4365 level where we can find the confluence with a previous swing level, the 38.2% Fibonacci retracement level and the red 21 moving average. The second one is around the downward trendline where there will be the confluence with the daily blue 8 moving average and the 50% or 61.8% Fibonacci retracement level. The buyers, on the other hand, will want to see the price breaking above the trendline to invalidate the bearish setup and position for another rally.
Upcoming Events
This week is pretty bare on the data front with just a couple of notable economic releases. Tomorrow, we will get the latest US Consumer Confidence report while on Thursday we will see again the US Jobless Claims data. On Friday, we conclude the week with the US PCE data.