S&P 500 Boosted by Trader Confidence in the Fed

The S&P 500 futures (CME: ES) are on the brink of reaching their highest point since April 2022. Traders anticipate a slight cooling of US Core Inflation expected to be released today, which was previously at 5.5%. This could lead to a potential pause in interest rate hikes by the Federal Reserve in June; however, inflation remains high, so the chances of a further 25 basis point hike may not be zero. Despite this, trader confidence seems to remain strong as the index edges further and further away from its October lows. 

Within the Index, Broadcom (ISIN: US11135F1012) and Adobe (ISIN: US00724F1012)  experienced notable growth in Monday’s trading session, increasing by 6.72% and 5.54%, respectively, following promising earnings releases. Additionally, six out of the eleven sectors within the S&P are seeing upward movement, particularly the technology and consumer discretionary sectors, which have seen gains of 1.4% and 1.36%, respectively. The increased activity in the consumer discretionary sector may be a positive sign, as it had previously declined due to recessionary fears. 

Technical 

The S&P is seeing upward momentum following gains by companies within the index and the growing possibility of a Fed pause. Against the backdrop of a boost in trader confidence, the bulls have managed to surpass the 4320.75 resistance and edge the index level towards the April 2022 high of 4626.25. As the index level edges further away from the 50-day moving average and the MACD Indicator shows no signs of reversing, the bears may hope for a rise from the Fed to see a break in this bullish sentiment.  

If the Fed decides to hike interest rates in June, the bears could see a drive towards the 4320.75 level, where an increase in the CPI expected to be released today could see them break the upward momentum and edge the index level towards the 4266.75 support, which could act as a possible pivot point for the bears as the index surpasses the 50-day moving average. 

Summary 

Trader confidence in the possibility of a Fed pause seems to be driving the upward momentum of the S&P towards the previous April 2022 high of 4626.25. However, inflation might come in higher than expected, leading to a further interest rate hike in June which may mark the 4266.75 support as a turning point for the bears. 

Sources: TradingView, Reuters