US 100 Index – Fed to Bring Christmas Cheer or Fear?
The US 100 has been on a roll over the last 2 weeks adding around 800 points or about 3.5% since its opening level of 20,950 on Monday December 2nd.
This week however, the US 100’s December rally faces a tough test on Wednesday in the form of the Federal Reserve Interest Rate Decision (1900 GMT) and the Press Conference led by Chairman Jerome Powell (1930 GMT).
Ahead of these events, it’s not so much the actual interest rate decision that stock index traders are nervous about, as the Fed are widely expected to cut rates another 25bps (0.25%) at this meeting.
Their concerns are focused on whether recent resilient US economic data, sticky inflation readings and Trump taking office are enough for Fed policymakers to feel the need to slow the pace of rate cuts as markets move into 2025.
Constituents of the US 100 index, often known as growth stocks, can be more sensitive to US interest rate changes, so this latest Fed meeting may have important implications for the US 100 index.
This could well determine if the Tech sector is to see Christmas cheer in the shape of a ‘Santa rally’, or if the Fed Grinch is set to install fear and uncertainty into traders during the final 2 weeks of 2024.
Technical Backdrop:
Of course, it has already been a strong advance since the August 5th spike low, but what are the levels we can monitor into and over the announcement?
Resistance Points to Watch
While it has been a positive pattern of higher highs and higher lows in price for the US 100 index, resistance has been found at the trendline connecting highs since August 1st, which continued to limit last week’s attempts at strength. This line starts the new week at 21833, and the daily closing defence of this level will be watched closely.
Successful closing breaks above this level, while not a guarantee of future price strength, may see a further phase of upside moves, once again pushing into uncharted territory of new all-time highs.
Fibonacci extension measurements of the November 11th to November 19th correction, offers a possible first resistance level after the trendline, marked by the 38.2% extension at 22151. This may prove to be a stumbling block to any future advance, but if breached price activity could possibly test 23010, the higher 61.8% level.
Support Levels
If corrective themes emerge either into, or after the Fed announcement, a first support level to focus on could be 21286, which is equal to the 38.2% Fibonacci retracement of November 19th to December 13th strength. While this type of level has in the past limited price weakness, it may not again, but traders could be looking for this area to limit declines once more.
If this first retracement support is unsuccessful in holding any weakness in price, the uptrend connecting the lows since August 5th downside extremes, currently stands at 21111. In the past this level has been able to hold and reverse selling pressure, so daily closes below this level, may be a sign of further price weakness materialising.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
This week however, the US 100’s December rally faces a tough test on Wednesday in the form of the Federal Reserve Interest Rate Decision (1900 GMT) and the Press Conference led by Chairman Jerome Powell (1930 GMT).
Ahead of these events, it’s not so much the actual interest rate decision that stock index traders are nervous about, as the Fed are widely expected to cut rates another 25bps (0.25%) at this meeting.
Their concerns are focused on whether recent resilient US economic data, sticky inflation readings and Trump taking office are enough for Fed policymakers to feel the need to slow the pace of rate cuts as markets move into 2025.
Constituents of the US 100 index, often known as growth stocks, can be more sensitive to US interest rate changes, so this latest Fed meeting may have important implications for the US 100 index.
This could well determine if the Tech sector is to see Christmas cheer in the shape of a ‘Santa rally’, or if the Fed Grinch is set to install fear and uncertainty into traders during the final 2 weeks of 2024.
Technical Backdrop:
Of course, it has already been a strong advance since the August 5th spike low, but what are the levels we can monitor into and over the announcement?
Resistance Points to Watch
While it has been a positive pattern of higher highs and higher lows in price for the US 100 index, resistance has been found at the trendline connecting highs since August 1st, which continued to limit last week’s attempts at strength. This line starts the new week at 21833, and the daily closing defence of this level will be watched closely.
Successful closing breaks above this level, while not a guarantee of future price strength, may see a further phase of upside moves, once again pushing into uncharted territory of new all-time highs.
Fibonacci extension measurements of the November 11th to November 19th correction, offers a possible first resistance level after the trendline, marked by the 38.2% extension at 22151. This may prove to be a stumbling block to any future advance, but if breached price activity could possibly test 23010, the higher 61.8% level.
Support Levels
If corrective themes emerge either into, or after the Fed announcement, a first support level to focus on could be 21286, which is equal to the 38.2% Fibonacci retracement of November 19th to December 13th strength. While this type of level has in the past limited price weakness, it may not again, but traders could be looking for this area to limit declines once more.
If this first retracement support is unsuccessful in holding any weakness in price, the uptrend connecting the lows since August 5th downside extremes, currently stands at 21111. In the past this level has been able to hold and reverse selling pressure, so daily closes below this level, may be a sign of further price weakness materialising.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Pernyataan Penyangkalan
Informasi dan publikasi tidak dimaksudkan untuk menjadi, dan bukan merupakan saran keuangan, investasi, perdagangan, atau rekomendasi lainnya yang diberikan atau didukung oleh TradingView. Baca selengkapnya di Persyaratan Penggunaan.