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.
Source link
