The The Fed eventually fell silent its tightening cycle last week to 5.00-5.25%. The reason was that they wanted to see more economic data before deciding on another hike as they try to fine-tune the right level of monetary tightening needed to bring inflation down to the 2% target without causing too much pain to the economy. The S&P 500 rallied the day after the FOMC decision and retreated a bit ahead of the June long weekend, although there was no negative catalyst.
S&P 500 Technical Analysis – Daily Time Frame
S&P 500 daily
On the daily chart, we can see that once the S&P 500 broke out of the 4324 resistance, it began to parabolic as FOMO likely kicked in. There is now no real resistance until the 4628 swing level, and as long as the disinflationary trend continues and the labor market doesn’t deteriorate too much, we could still see new higher highs.
S&P 500 Technical Analysis – 4 Hour Time Frame
S&P 500 4 hrs
On the 4-hour chart, we can see that the red 21 moving average acted as a dynamic support in the last bounce and can do so again this time. We can also see that we have a trend line for additional support and the previous swing high level. Buyers should hold on to this level and look for further upward pressure, while sellers should pile in if the price breaks below the trend line.
S&P 500 Technical Analysis – 1 Hour Time Frame
S&P 500 1 hour
On the 1-hour chart, we can see more closely the support zone we highlighted earlier. Here we also see that we have 50% Fibonacci retracement the level for further concurrence and price action into this support zone forms a falling wedge, which is more observable from an even lower time frame such as 15 or 5 minutes. This is generally a reversed pattern, so we might expect at least a rebound here. Sellers will want to see the price decline to pile up and extend the pullback to the 4380 swing low and target 4324 support after the break.
This week it’s pretty bare on the data front, but we’ll get comments from many Fed officials, with Fed Chair Powell also testifying before Congress on Wednesday and Thursday. Over the weekend we will see another Jobless Claims report on Thursday and US PMI on Friday.
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