The S&P 500 got stuck in a range in recent
weeks as the bullish momentum waned but the upside view continued
to be supported by the lack of bearish drivers. The US inflation data this week showed some tariff passthrough but the data came below expectations.
We got a brief spike to the downside following the news of Trump potentially firing Fed Chair Powell which was eventually faded as the President mentioned that it was highly unlikely that he would do such a thing.
On the economic activity side, yesterday we got some strong data with Retail Sales, Jobless Claims and the Philly Fed index all beating expectations and showing that the economy remains on a healthy pace.
In the bigger picture, given that the Fed’s reaction function remains to either wait more or
cut, the market should continue to climb and the only short-term risks could come from a hawkish repricing in interest rates expectations or a material escalation on the tariffs front (without deadlines, pauses, delays and so on).
On the 1 hour chart, we can see that we got a spike into the bottom of the range following the news of Trump potentially firing Fed Chair Powell. That was naturally faded as the Trump-Powell saga continues to be just noise. The dip-buyers piled in around the support to position for the rally into the top of the range.
Yesterday, we got the strong US data and the buyers increased the bullish bets into the top of the range eventually leading to a breakout. If we get a pullback, we can expect the buyers to step in around the previous resistance at 6,333-ish level. The sellers, on the other hand, will want to see the price falling back below the level to start targeting a deeper pullback into the 6,246 support
