S&P 500, Nasdaq talking points:

  • The next morning, the Fed produced robust moves in the markets, with stocks and bonds surging noticeably.
  • Yesterday’s FOMC spending was messy with the bank’s rate-increase forecast while avoiding a specific date for the cut to start.
  • The analysis contained in the article is based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.

The next morning, the Fed and stocks continue to climb, although Treasury rates also rise. While yesterday’s post touched on the timing of possible rate hikes, there was also no formal announcement to cut the FOMC and that last element appears to be what the markets are focusing on right now. moment. After all, Powell has repeatedly said to take the dot plot matrix with a grain of salt, which seems like what we have today to bring prices down.

On the tapering front – Powell said the bank could be ready for such an announcement soon, possibly even in the next FOMC rate decision in November. The key will be employment data, so expect close attention to the next NFP report in October. The November NFP report will be released after the Fed’s rate decision (scheduled for Tuesday and Wednesday November 2-3); the focus on employment data is therefore likely to be intense before this next rate decision.

In response to yesterday’s more hawkish dot plot matrix, U.S. Treasury rates continue to rise and the 10-year note is now hitting a two-month high, trading above 1.4% for the first time since July.

Normally, a move of this nature would put some pressure on stocks. But, so far this morning, not much has shown, as we will see below.

10-year U.S. Treasury yield: new two-month highs

Graphic prepared by James stanley; TNX on Tradingview

Stock prices are recovering in response to yesterday’s FOMC spending, and US stocks are further recovering from Evergrande fears that surfaced in US markets earlier this month. As this situation continues to develop, the bulls appear to be warding off some of that risk while pushing the S&P 500 to a new weekly high. This ultimately closed the gap that arose to start this week’s trade.

On the chart below, I’m looking at SPY, an ETF representing the S&P 500. Price action has held up fairly well along this Fibonacci retracement encompassing the major May-September move. Monday’s spread decline and continued selling continued until the 50% retracement of this major move. But – that level held steady and prices started to tilt higher on Tuesday and have continued to do so since, benefiting from a boost from yesterday’s FOMC rate decision.

To learn more about Fibonacci, to verify DailyFX Education

S&P 500 Daily Price Chart (SPY)

SPY ES SPX SP500 Daily Price Chart

Graphic prepared by James stanley; S&P 500 on Tradingview

Nasdaq trains Morning Star out of support

I had reviewed these sales on Monday, highlighting a support level in the Nasdaq 100 which continued to help hold lows. The three-day streak of price action in the index produced morning star formation, often followed with the aim of bullish reversal potential, highlighting a possible market bottom.

To learn more about the morning star formation, to verify DailyFX Education

This formation continued with today’s strength, leaving the door open to bullish recovery scenarios. But, traders will likely want to remain cautious about the dynamics of the Treasury market, as the 10-year note has sold with rising yields, which has recently been an element of sensitivity for the technology-heavy index. .

Nasdaq 100 Daily Price Chart

Nasdaq 100 Daily Price Chart

Graphic prepared by James stanley; Nasdaq 100 on Tradingview

— Written by James stanley, Senior strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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