Current trend

Ahead of the US Federal Reserve meeting, the S&P 500 index is holding at historic highs of 5660.00.

Investors have adjusted their expectations for the size of the interest rate adjustment, with the Chicago Mercantile Exchange (CME) FedWatch Tool now showing the probability of a 50 basis point cut at 59.0% from 30.0% last week, while the probability of a 25 basis point cut has changed from 70.0% to 41.0%, driving the uptrend in stock indicators as the implementation of the forecasts will certainly weaken the dollar. However, the accompanying statement and subsequent press conference by Fed Chairman Jerome Powell will also be important. If the official’s statements make it clear that there are significant risks to the economy, traders may start taking profits on stocks, which will lead to a decline in the S&P 500 index.

It is also worth paying attention to the historical seasonality in US stocks: the end of September has usually been the culmination of previous trends and the beginning of a reversal. According to research by Bank of America experts, last week saw the strongest outflow of capital from financial sector securities in ten months, as market participants try to hedge risks against the backdrop of imminent changes in the rules for such institutions, which will affect key components of the Basel III regime, an international set of regulations developed by the Basel Committee on Banking Supervision in response to the global financial crisis of 2008. Their goal is to strengthen capital requirements, raise liquidity standards, and minimize the level of financial influence on banking activities. Against this backdrop, shares of the largest US banks may decline, which will entail a weakening of the S&P 500 index, since the sector makes up 10.0–15.0% of its total market capitalization.

Support and resistance

The long-term trend is upward: after the correction in August, the price returned to levels close to historical maximums, around 5660.00. In early September, another correction could be observed, this time less deep, to the level of 5400.00, from which the price continued to grow and is preparing to update the July maximum of 5676.00 this week. If the resistance level of 5660.00 is broken out during trading and the instrument consolidates above it, the next target will be the 5830.00 mark.

The medium-term trend is also upward: after reaching the target zone 2 (5673.00–5645.00) in August, the price corrected to the key support of 5387.00–5359.00 in early September, which was held by buyers. As a result, the instrument again reached zone 2, a breakout of which will become a catalyst for reaching the levels of 5949.00–5921.00 and holding the resistance area of 5673.00–5645.00 will trigger a new downward correction.

Resistance levels: 5660.00, 5830.00, 6000.00.

Support levels: 5400.00, 5170.00, 4943.00.

Trading tips

Short positions can be opened from the level of 5660.00 with a target of 5400.00 and a stop-loss of 5765.00. Implementation period: 9–12 days.

Long positions can be opened above the 5765.00 mark with a target of 6000.00 and a stop-loss of 5655.00.