Jump to content

FOMC headlines a huge week, and what next for the S&P 500

Recommended Posts

In preparation for the release of the FOMC data on December 15, IG analyst Tony Sycamore explores what's next for the S&P 500.

1670895146269.jpgSource: Bloomberg

 Tony Sycamore | Market Analyst, Australia | Publication date: Tuesday 13 December 2022 

The holiday season is fast approaching.

However, before traders can take a well-earned break, a huge week lies ahead, including critical central bank interest rate meetings—chief amongst them Thursday morning’s FOMC meeting.

Following a downside surprise in U.S inflation in October, Fed Chair Powell, speaking at the Brookings Institute on November 30th, indicated that the pace of Fed tightening was set to slow from 75bp to 50bp.

He stated, “It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.” This is a “good way to balance the risks” to the economy.

The markets have taken the Fed Chairs message at face value, and the interest rate market expects the Fed Funds rate to rise on Thursday by 50bp to a range of 4.25-4.50%.

Aside from the actual rate rise, the focus will be on the tone and content of the accompanying press conference and the projected peak for the Fed Funds rate in 2023.

The impressive rally in stock and bond markets, along with a sell-off in the US dollar since mid-October, has resulted in a substantial easing in financial conditions.

An easing in financial conditions is counterproductive to the Fed's aims of taming inflation and cooling the labour market. As such, the tone of the Fed Chairs press conference is expected to sound more hawkish than his speech at the Brookings institute.

There is some conjecture about whether the median Feds dot plot peak will be raised to 4.875% or 5.125%. The latter would provide the Fed with more optionality around balancing the risks of inflation verse recession.

What do the charts say?

The rally in the S&P 500 from the October 3502 low tagged to perfection the downtrend resistance at 4110, coming from the January 4808 high, and is viewed as countertrend.

The S&P 500 needs to see a sustained break above the 4100/4110 resistance zone, post the FOMC, to negate the downside risks and to suggest a more robust recovery towards the 61.8% retracement at 4310 is underway.

On the downside, a sustained break of near-term support at 3910/00, post the FOMC meeting, would likely set up a test of support 3750 area.

S&P 500 daily chart

1670897159188.pngSource: TradingView

Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 17/05/23 10:51
  • Posts

    • Look ahead to 2/6/23: US jobs; Baker Hughes rig count After the stronger than expected private payrolls number from ADP, risks would seem to be on the upside for the US non-farm jobs number on Friday.  Jeremy Naylor | Analyst, London | Publication date: Thursday 01 June 2023  IGTV’s Jeremy Naylor looks at USD/JPY as a potential trade. Outside of this watch Brent around the Baker Hughes rig count.            
    • What's the next move following the bank run that led to a rally in US stocks? The markets have been giving us hints on its coming trend, which markets are they? Deploying market psychology not only helps us to connect the dots in today’s complexity, it also gives us the simplicity to chart into the future. In this session, we have invited market veteran, Wong Kon How, to help you improve your trading literacy and successfully navigate the financial markets. Kon How will demonstrate how he understands today’s market complexity and seizes the coming opportunity with behavioral science.  
    • Charting the Markets: 1 June Dow and CAC40 stabilise while Nasdaq 100 edges down. EUR/USD, EUR/GBP and USD/CAD stabilise as US debt ceiling bill goes to Senate. And Brent, orange juice stabilise while copper advances as US debt ceiling bill gets signed. Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 01 June 2023               This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
  • Create New...