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S&P500 Technical Analysis – Fed in Focus

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In terms of technical analysis for the S&P500, the major trendline that defined
the 2022 bear market has been finally breached. The market keeps on charging
higher and higher on expectations that the Fed will end its tightening cycle
soon and inflation returns back to target without a significant damage to the

In fact, since November 2022,
inflation data have been showing a clear easing in inflation and the labour
market data kept on beating expectations.

The problem is that inflation and
employment are lagging indicators and the leading indicators have been pointing
to something pretty bleak on the horizon, which has been largely ignored by the

It might be that until the labour
market data do not show a notable weakening, the bulls will have the upper hand
. This week there are many
economic reports focused on the labour market, so it’s going to be a big one.

The other major risk is that the
Fed decides to surprise with a 50 bps hike, although this is very unlikely
since they follow market pricing, and they already telegraphed a 25 bps move.

On the daily chart above, we can
see that the major blue trendline that defined the 2022 bear
market has been breached. The bulls may now target the first resistance at 4175.

If they manage to extend higher,
then the resistance at 4324 will be targeted. If we see the bears smacking the
price back down below the blue trendline, that would be a possible major
fakeout signal and the start of another big sell off with the support at 1506.

Looking at the 4 hour chart, we
can see that the minor upward blue trendline will define the current short-term
uptrend from the major downtrend. At the moment, the price is diverging with the MACD, which generally signals a
possible pullback or reversal.

If the labour market reports beat
expectations again and the Fed doesn’t deliver any surprises, the resistance at
4175 should be reached without issues.

Zooming in to the 1 hour chart, we can see that there are
two possible scenarios for the near-term price action: break above the 4108
resistance and the bulls should manage to reach the 4175 resistance, on the
other hand, break below the 4056 support and the bears should regain control
and target the minor blue trendline.

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