Piece written by Alexa Smith, Trive Financial Market Analyst  

The S&P 500 Futures (CME: ES) slumped following the anticipated decision by the US Federal Reserve to leave key interest rates unchanged. The Federal Reserve’s announcement was accompanied by the release of its Summary Economic Projections (SEP) and dot plot, indicating the possibility of an additional 25 basis point rate hike before the end of the year.  

The SEP forecasts suggested that inflation would decrease to 3.3% by the end of the year, moving closer to the central bank’s average annual 2% target. However, during the subsequent press conference, Fed Chair Jerome Powell tempered the brighter economic outlook with a cautionary note, indicating that inflation still had a considerable distance to go before reaching the desired target. Among the various sectors of the S&P 500, communication services and technology sectors experienced the most significant percentage losses. 

Technical 

The Federal Reserve’s hawkish pause nipped the formation of an ascending channel pattern in the bud as the S&P 500 Futures tumbled for support. An upswing encouraged the index futures to establish resistance at 4565.25, but the price action flattened ahead of the Fed’s interest rate decision at the 4487.75 support, the 38.20% Fibonacci Retracement level. 

A surge in selling volume encouraged a further pullback, but oversold levels encouraged a slight tick-up towards the 4439.75 resistance at the Golden Ratio. Since the 50-day moving average converges with the 100-day moving average, the Golden Ratio could hold and spur a move down towards the 4405.50 support. However, a breakdown of the Golden Ratio may spur upside momentum and promote a leg up towards the 4487.75 resistance.  

Summary 

The S&P 500 Futures tumbled due to hawkish signals from the Federal Reserve. The US economy has showcased its resilience, prompting the Fed to keep interest rates elevated for longer and encouraging a pullback. Since the index futures have settled at the Golden Ratio, a breakout towards the 4487.75 resistance could mark a pivot point for a reversal. However, dwindling demand could bring the index futures in line with the 4362.25 support.  

Sources: TradingView, Reuters