The S&P 500 got stuck in a range in recent weeks as the bullish momentum waned. The upside continues to be supported given the lack of bearish drivers. There might be some concern around Trump's tariffs but the TACO trade remains intact at least until August 1.
The US CPI report yesterday might have weighed on the sentiment but the data was actually in line with expectations and arguably on the softer side than feared. The market did pare back further the rate cut bets with the pricing now showing 44 bps of easing by year end compared to 47 bps before the CPI release. That could still change today after the US PPI report.
A soft report might get us back to roughly 50 bps of easing by year-end and help to ease yesterday's concerns (if it was indeed inflation concern). Conversely, hot data could strengthen market's worries that we might see even higher data in the next months and likely weigh further on sentiment.
In the bigger picture though, given that the Fed's reaction function remains to either wait more or cut, the market should eventually get back to its upward trend.
On the 4 hour chart, we can see the range between the 6,246 support and the 6,333 resistance. The market participants will likely continue to play the range by buying at support and selling at resistance until we get a breakout on either side. If we break to the downside, the buyers will find a strong support zone around the 6,160 level where we have the confluence of the previous all-time high and a major trendline.
