FundamentalOverview

The S&P 500 yesterdaysold off aggressively following the FOMC decision as the market perceived it as morehawkish than expected.

Overall, apart from someslight tweaks, the Fed was in line with the market’s expectations, and theselloff might have been an overreaction. There’s lots of noise during such big events, so be careful of that.

The data is what reallymatters now as it will decide what the Fed is going to do. It will likely takejust one soft CPI report in January to see the market reacting in a dovish way andprint new all-time highs.

For now, the conditions forfurther upside remain in place. In fact, Trump’s policies should be a positivedriver for growth in 2025 and with the Fed remaining in an easing cycle, growthshould remain positive and might even accelerate as seen already recently bythe Atlanta Fed GDPNow indicator.

The risk in 2025 is ofcourse inflation and the Fed’s reaction function. Right now, the Fed’s reactionfunction is that a strong economy would warrant a slower pace in the easingcycle and not a tightening. That should still be supportive for the stockmarket.

If the Fed’s reactionfunction were to change to a potential tightening, then that will likelytrigger a big correction in the stock market (if not even a bear market giventhe stretched valuations) on expected economic slowdown. For now, we remain ina “buy the dip” environment.

S&P 500Technical Analysis – Daily Timeframe

On the daily chart, we cansee that the S&P 500 sold off from the highs following the FOMC decision.The closest supportwe have is around the 5855 level. If the price extends the drop into the level,we can expect the buyers to step in with a defined risk below the level toposition for a rally into a new all-time high. The sellers, on the other hand,will want to see the price breaking lower to increase the bearish bets into thenext support around the 5720 level.

S&P 500 TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, we cansee that we have already some dip-buyers entering the market trying to fade yesterday’sreaction. Although there’s no clear support around these levels, someaggressive buyers might still step in here with a defined risk below the yesterday’slow to position for a rally into new highs. The sellers, on the other hand, willlook for the low to be broken to increase the bearish bets into the 5855support.

S&P 500 TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, there’snot much else we can add here as we are trading right in the middle of two keylevels. The red lines define the average daily range for today.

UpcomingCatalysts

Today we get the latest US jobless claims figures, while tomorrow we concludethe week with the US PCE data.