S&P 500 (SPX) gets ready for Fed breakout

Equity markets bounce on CPI data but fail to hold gains.
Fed decision looms large as risk is reduced beforehand.
Fed expected to unveil a higher dot plot.

Ivan Brian FXStreet

Equity markets surged on another tame CPI print on Tuesday before booking profits and taking chips off the table ahead of the Fed interest rate announcement today. The CPI print was more good news, and the US Dollar weakened. The NASDAQ initially rallied 4% but gave up nearly all those gains to finish 1% higher. It was the top index performer.

S&P 500 (SPX) news

Today will see very limited action ahead of the Fed. We can expect a higher dot plot, but the market has been ignoring this message from Powell repeatedly – that of higher rates for longer. We are not sure then that the market will all of a sudden heed Powell. It feels like the market wants to rally, and after two successive lower-than-expected CPI prints it will be hard for Powell to dent enthusiasm in the presser.

S&P 500 (SPX) forecast

4,100 and 3,900 remain the big levels still. Expect some decent moves around the presser. The decision itself should not come as too much of a surprise. 4,300 is the target on a break higher, and 3,806 is the target on a break lower. Sentiment and options look set for a slight skew higher.

SPX daily chart

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Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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