Fundamental Overview
The
US CPI report yesterday came in line with expectations and sealed the 25 bps cut next week with the probabilities standing around 97%. The S&P 500 rallied strongly as there were fears of potentially higher than expected data and the hedges into the CPI release got unwound.
Overall, the market’s pricing remains largely unchanged around three rate cuts by the end of 2025. We will likely need stronger evidence of inflation re-accelerating to price out the remaining rate cuts. For now, the conditions for further upside remain in place.
In fact, Trump’s policies should be a positive driver for growth in 2025 and with the Fed remaining in an easing cycle, growth should remain positive and might even accelerate as seen already recently by the Atlanta Fed GDPNow indicator.
The risk in 2025 will be inflation and the Fed’s reaction function. Right now, the Fed’s reaction function is that a strong economy would warrant a slower pace in the easing cycle and not a tightening. That should still be supportive for the stock market.
If the Fed’s reaction function were to change to a potential tightening, then that will likely trigger a big correction in the stock market on expected economic slowdown. For now, we remain in a “buy the dip” environment.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 bounced around the 6053 level and extended the rally into the recent highs following the US CPI release. The buyers will keep on targeting new all-time highs, while the sellers will want to see the price falling below the 6053 level to position for a drop into the major
trendline around the 6000 level.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the recent price action with the bounce around the 6053 level and the rally out of the US CPI release. The sellers will likely step in around the 6111 high to position for a drop back into the 6053 level, while the buyers will look for a break higher to increase the bullish bets into new highs.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have an interesting zone around the 6075 level where the price reacted from several times in the past few days. If we get a pullback into it, the buyers will likely step in with a defined risk below the zone to position for a rally into new highs with a better risk to reward setup. The sellers, on the other hand, will look for a break lower to position for a drop into the 6053 level. The red lines define the
average daily range for today.
Upcoming Catalysts
Today we get the latest US jobless claims figures and the US PPI report.
This article was written by Giuseppe Dellamotta at
www.forexlive.com.
