Fundamental Overview
The S&P 500 is approaching the all-time highs supported by two recent catalysts. The first one came from Fed’s Bowman who delivered dovish comments and even suggested that she would support a rate cut in July if inflationary pressures were to be muted. Since she’s been a hawkish member until yesterday, it was meaningful for the market.
The second catalyst came late in the US session as Iran’s retaliation was seen as just a show much like the one witnessed in 2020 with Suleimani. The market started to expect the end of the conflict which was then validated by Trump’s post on his social media platform.
In the big picture, the path of least resistance remains to the upside as growth expectations continue to improve. We now have very little risks ahead. The only one I can see as of now is Trump’s bill failing in the Senate. The trade war shouldn’t be a risk anymore as the deadline will be extended if needed and it’s now clear to everyone that we will settle around 10% tariff rate.
The positive drivers continue to be expansionary fiscal policy and the dovish Fed reaction function. The main driver of the stock market is growth expectations, so as long as those remain skewed to the upside, we should keep grinding higher.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 is approaching the all-time high following the dovish Fed’s Bowman comments and the Israel-Iran de-escalation. This is where we can expect the sellers to step in with a defined risk above the all-time high to position for a drop back into the 5,800 support zone. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been trading inside a rising channel for the entire month. Right now, we are close not only to the all-time highs but also to the upper bound of the channel.
This might turn out to be a strong resistance to break on the first try and the sellers will have more conviction to step in around these levels with a protected stop above the channel. The buyers, on the other hand, will look for a breakout to invalidate the bearish setup and increase the bullish momentum.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here but on a short term basis, if we get a break below the 6,110 level, we could see the sellers extending the pullback into the 6,071 level next, where a further break to the downside would likely take us back to the lower bound of the channel. The buyers, on the other hand, will look for dip-buying opportunities around those levels as the fundamental trend remains to the upside. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we have the US Consumer Confidence report and Fed Chair Powell Testimony. On Thursday, we get the latest US Jobless Claims figures and the Final US Q1 GDP report. On Friday, we conclude the week with the US PCE price index and the Final University of Michigan Consumer Sentiment report.
This article was written by Giuseppe Dellamotta at www.forexlive.com. Read More Details
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