Piece Written By Nkosilathi Dube, Trive Financial Market Analyst 

Following a 25 basis point rate hike by the Federal Reserve, the S&P500 Futures (CME: ES) closed unchanged on Wednesday. The index futures had a strong start to trading on Thursday and is closing down on a 69-week high as it inches closer to a third consecutive week of gains. The index futures, which house equities that normally struggle to gain upside traction in high interest-rate environments, remained resilient as the Fed predicts a recession is unlikely.  

The Federal Reserve raised interest rates for the eleventh time in 12 meetings and stated that additional rate hikes might be necessary if inflation data supports them. On the other hand, the market discounted the Fed Press Conference and currently assigns a 78% probability that Wednesday’s hike will be the final one of 2023. What should traders expect with the S&P500 Futures closing down on 2022’s highs? 

Technische Analyse 

Bullish traders have been in the driver’s seat of the S&P500 Futures, which trades well above its 100-day moving average. The index futures is now closing in on a one-year high set in March 2022 as the market has favoured risk assets.  

Given that upside momentum has taken precedence and the market has priced in a pause in the upcoming interest rate decision, the index futures will likely extend the move higher into the coming days or months. The 4631.00 level, which coincides with the 23.60% Fibonacci Extension level, will likely serve as a point of interest to the upside. However, with the Relative Strength Index conditions pointing to overbought levels, the index futures could make a reversal, given that upside momentum falters, leaving the 4573.75 level probable.  

Zusammenfassung 

If the market rides on the likelihood of yesterday’s rate hike being the last of 2023, the index futures could continue to gain upside traction, leaving the 4631.00 level probable. However, with the PCE Index looming, the Feds preferred inflation gauge, a higher inflation reading could weaken optimism in the index futures as the possibility of one more rate hike gets priced in.  

Sources: Federal Reserve, CME, Reuters, TradingView