FUNDAMENTAL OVERVIEW
The S&P 500 opened lower yesterday but eventually erased all the losses and reached new weekly highs. The sentiment changed last Wednesday when Trump announced that he reached a “framework” of a deal for Greenland and that he won’t go ahead with tariffs. That was the TACO trade that everyone was waiting for.
As mentioned last week, with this risk out of the way, and barring new geopolitical escalations, we should have a clear path to new all-time highs. The focus should now switch back to economic data and the Fed. Some hawkish repricing could weigh on the market in the short-term, but those will likely be dip-buying opportunities as long as there’s no re-acceleration in inflation.
Tomorrow, we have the FOMC decision where the central bank is expected to keep everything unchanged as they await more data before considering further rate cuts. There’s also a chance that Trump decides to steal the show by announcing his Fed chair pick. The leading candidates, in order of likelihood, are Rieder, followed by Warsh and Waller. The market might like Rieder or Waller due to their perceived likeliness of convincing the other members to vote alongside them and because of lower risk of loss of Fed independence.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that the S&P 500 eventually erased all the losses experienced after the Trump’s escalation over Greenland. The price is now slowly approaching a new all-time high as bearish risks recede. There’s not much we can glean from this timeframe, so we need to zoom in to see some more details.
S&P 500 TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that the price broke above the downward trendline yesterday and extended the gains into new highs as the buyers increased the bullish bets into new record highs. We have an upward trendline now defining the bullish momentum. From a risk management perspective, the buyers will have a better risk to reward setup around the trendline to keep pushing into new highs. The sellers, on the other hand, will need the price to break lower to open the door for a drop into the 6,771 level next.
S&P 500 TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we have a minor support zone around the 6,970 level. This is where we can expect the buyers to step in with a defined risk below the support to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to extend the pullback into the trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the weekly US ADP jobs data and the US Consumer Confidence report. Tomorrow, we have the FOMC policy announcement. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US PPI report.
