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.
Fed speakers keep repeating that they want to see more data and Fed Chair Powell confirmed during his testimony to Congress that getting back to the 2% target has a long way to go and that two more rate hikes this year was a “pretty good guess” if the economy performs as expected.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 is finally pulling back after a very strong rally since the beginning of June. Technically, the first support for the pullback should be the 4324 level where we will also find the red 21 moving average for further confluence. That’s where we should expect dip-buyers to start piling in to target new highs.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the moving averages have crossed to the downside indicating a bearish momentum. We can also find the 38.2% or 50% Fibonacci retracement levels near the 4324 support which adds even more strength to the level.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a downward trendline defining the short term trend with the red 21 moving average acting as dynamic resistance. As long as this trendline holds, we can expect the sellers to lean on it targeting the 4324 support. The buyers, on the other hand, will either wait for the price to come to the 4324 support or pile in as soon as the price breaks above the trendline.
The next data to watch are the US Jobless Claims today and the US PMIs tomorrow.
