The Fed eventually paused its tightening cycle last week at 5.00-5.25%. The reason was that they wanted to see more economic data before deciding on further hikes as they are trying to fine-tune the right level of monetary restraint needed to bring inflation down to the 2% target without causing too much pain in the economy. The S&P 500 rallied the day after the FOMC decision and pulled back a little just before the long Juneteenth weekend, although there wasn't any negative catalyst.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that as soon as the S&P 500 broke out of the 4324 resistance, it started to go parabolic as the FOMO probably kicked in. There’s no real resistance now until the 4628 swing level and as long as the disinflationary trend continues and the labour market doesn’t deteriorate too much, we may keep seeing new higher highs.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the red 21 moving average has acted as dynamic support with the last bounce and it may do the same this time as well. We can also see that we have a trendline for further support and a previous swing high level. The buyers should lean on this level looking for another push to the upside, while the sellers should pile in in case the price breaks below the trendline.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the support zone we highlighted earlier. Here we can also see that we have a 50% Fibonacci retracement level for further confluence and the price action into this support zone is forming a falling wedge, which is better observable from an even lower timeframe like 15 or 5 minutes. This is generally a reversal pattern, so we might expect at least a bounce here. The sellers will want to see the price breaking lower to pile in and extend the pullback into the 4380 swing low level first and, upon a breakout, target the 4324 support.
This week is pretty bare on the data front, but we will get comments from many Fed officials, with Fed Chair Powell also testifying to Congress on Wednesday and Thursday. Going into the weekend we will see another Jobless Claims report on Thursday and the US PMIs on Friday.
See also the video below:
