S&P500 How to trade it following the 0.75% Rate Hike


The S&P500 index (SPX) dipped aggressively following yesterday’s Fed Rate Decision, which was a natural reaction to the third straight 0.75% rate hike. The first one was made on Jun 15 2022 (rate gone from 1.00% up to 1.75%) and the second on July 27 2022 (rate gone from 1.75% to 2.50%).

In both cases the market reacted positively by the following day, despite rate hikes fundamentally being negative for stocks. Especially in the case of June 15, the market was surprised as it got an even higher than expected hike (the forecast was 0.50% instead of the actual 0.75%) but still digested the news in such a way that it made a bottom on June 16 and started a rally that rose by +19%. That is the fundamental outlook for the moment.

As far as the technical aspect is concerned, the index is below both the 4H MA50 (blue trend-line) and the 4H MA200 (orange trend-line) since September 13. The trend is bearish since the August 16 Top. Early in today’s E.U. opening, the price is rebounding as it hit the top of the 3750 – 3720 Support Zone (1). As long as it holds, it can technically target the 4H MA50. Only a candle close above it can extend buying targeting the 4H MA200. Notice the similarities with the August 29 – September 07 Channel Down that eventually broke upwards and reached as high as the 0.5 – 0.618 Fibonacci Retracement Zone. That can make a perfect match with the 4H MA200. Note the similar patterns on the MACD as well.

A closing below Support Zone (1) however can deliver an rapid fall to Support Zone (2) 3660 – 3640 and eventually the 1W MA200 (red trend-line), which is the ultimate long-term Support.

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