Fundamental Overview
Last week, we got a pullback in the S&P 500 as the higher than expected inflation readings and a less dovish Powell weighed a bit on the market.
Despite the recent events though, the market’s pricing remained largely unchanged at three rate cuts by the end of 2025. This might be a signal that the market is now fine with the current pricing, and we will need stronger reasons to price out the remaining rate cuts.
The only bearish reason we had for the stock market was the rise in Treasury yields. That’s generally bearish only when the Fed is tightening policy though 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 in the bigger picture considering that Trump’s policies include tax cuts and deregulation.
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 pullbacks look as something healthy and opportunities to buy the dips.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 dropped below the 5918 support level but bounced back a couple of days later as the dip-buyers took advantage. As long as the price stays above the 5918 level, we can expect the buyers to pile in to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price falling back below the support to target a test of the trendline.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the choppy price action around the 5918 level as the market continues to wait for catalysts to push into either direction. There’s not much else we can glean from this timeframe although the 5918 level will likely act as a barometer for the sentiment.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another minor support around the 5930 level. If we get a pullback, the buyers will likely step in around those level with a defined risk below them to position for a rally into a new all-time high. The sellers, on the other hand, will look for a break lower to target a drop into the major trendline. The red lines define the average daily range for today
Upcoming Catalysts
Tomorrow, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US PMIs.