Fundamental Overview
The S&P 500 soared 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.
One potential bearish reason people are looking at is rising Treasury yields. That’s generally bearish when the Fed is tightening though as the market looks forward to an economic slowdown.
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 see the stock market correcting lower.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 bounced from the key support zone around the 5720 level and extended the rally into a new all-time high following Trump’s victory. The only technical level of note now is the resistance turned support around the 5918 level.
If we get a pullback, we can expect the buyers to step in there to position for a rally into new highs, while the sellers will look for a break lower to start targeting the 5830 level next.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the support around the 5918 level on this timeframe where we did get a bounce yesterday already. The momentum is strong but if we get a bearish reaction to the Fed’s decision in the afternoon, the dip-buyers will likely step in around that level to target new highs. The sellers, on the other hand, will look for a break lower to target the 5830 level.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much we can add here although the price action here looks like the momentum has slowed and we might get the pullback. The red lines define the average daily range for today
Upcoming Catalysts
Today we have the US Jobless Claims and the FOMC Policy Decision. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment report.