Fundamental Overview
The S&P 500 rallied into new all-time highs this week following a couple of positive catalysts. The first one came from Fed’s Bowman who delivered dovish comments and even suggested that she would support a rate cut in July if inflationary pressures were to be muted. Since she’s been a hawkish member, it was meaningful for the market.
The second catalyst, which gave the green light for the rally, came later in the same day as Iran’s retaliation was seen as just a show much like the one witnessed in 2020 with Suleimani. The market started to expect the end of the conflict which was then confirmed by Trump’s post on his social media platform.
Finally, yesterday’s rally got attributed to a WSJ report saying that Trump could speed up the nomination of the new Fed Chair for 2026 which the market expects to be a dove and to follow the President’s agenda. I’m personally sceptical of this take, but here we are.
In the big picture, the path of least resistance remains to the upside as growth expectations continue to improve. We now have very little risks ahead. The only one I can see is Trump’s bill failing in the Senate, which would likely just provide a pullback to buy at better prices.
The trade war shouldn’t be a risk anymore as the deadline will be extended and it’s now clear to everyone that we will settle around 10% tariff rate.
Finally, we have the US NFP and US CPI coming up in the next two weeks and those will be key for the Fed and market as they will influence interest rates expectations.
The positive drivers continue to be expansionary fiscal policy and the dovish Fed reaction function. The main driver of the stock market is growth expectations, so as long as those remain skewed to the upside, we should keep grinding higher.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 eventually managed to break into a new all-time high. The buyers piled in more aggressively on the breakout as the momentum kept going. For the sellers, there’s not much they can do here other than waiting for a fall back below the previous all-time high around the 6,150 level before considering shorts into the 6,000 level next.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the bullish momentum was so strong that the price broke through a strong resistance zone where we have also the upper bound of the rising channel. If we get a pullback into the 6,150 zone, we can expect the buyers to step back in with a defined risk below the zone to position for new highs. The sellers, on the other hand, will look for a break lower to start targeting the 6,000 level next.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here but on a short term basis, if we get a pullback into the minor upward trendline, the buyers will likely lean on it to keep pushing into new highs. From a risk to reward perspective, a pullback into the 6,150-6,160 zone would be better though. Dip-buyers could split their positions between the trendline and the support zone. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we conclude the week with the US PCE price index and the Final University of Michigan Consumer Sentiment report.
