Yesterday, the Fed left interest rates unchanged at 5.25-5.50% as expected but revised its outlook on the more hawkish side. In fact, the Fed not only sees another rate hike by the end of the year but also much less rate cuts in 2024 as they revised it from 4.6% seen in June to 5.1% now. The macroeconomic projections were also revised higher indicating a resilient economy. In the press conference Fed Chair Powell reaffirmed their data dependency and the need to move carefully as they approach the terminal rate. One thing that caught everyone by surprise is when asked if he would call the soft landing a baseline expectation now, Powell said "No, I would not do that".
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that after the week-long consolidation, the S&P 500 eventually broke out of the support defined by the red 21 moving average and it’s now targeting the 4328 support. That’s where we can expect the buyers to step in with a defined risk below the level to position for a rally into the highs. If the price breaks through the level though, the major upward trendline will be the next target and probably the last line of defence for the buyers.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely that the S&P 500 broke out of a strong support around the 4455 level as we had the confluence of the daily moving average, the 50% Fibonacci retracement level and the previous resistance turned support. This breakout is meaningful and the chances of further downside from here are very high.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the optimal level to short was right at the retest of the broken support. Right now, the price has already moved and from a risk management perspective it’s never a good idea to chase the market. If the market pulls back, another opportunity should be at the minor trendline where the sellers are likely to pile in again with a defined risk above the 4455 level and target the 4328 support. The buyers, on the other hand, will need the price to rally back above the 4455 level to invalidate the bearish setup and start targeting new higher highs.
Upcoming Events
The week is drawing to a close, but we still have a couple of key economic releases ahead. Today, the main event will be the US Jobless Claims report as the labour market data remains very important for the Fed and the market. Tomorrow, we will see the latest US PMIs data which is expected to be market moving.
See also the video below