S&P500 takes a breather following FOMC
Tony Sycamore June 11, 2020 3:40 PM
This morning’s FOMC meeting came and went with no major surprises. The Feds policy rate was left unchanged at the 0% - 0.25% range and was projected to remain there until 2022. Fed Chair Powell commented he was “not even thinking about raising rates” and that the pace of asset purchases would continue “at least at the current pace” over the coming months.
Despite the Feds dovish message of ongoing highly accommodative support that saw the NASDAQ close the session at fresh all-time highs, a far more cautious tone has emerged during the Asian time zone. Risk assets across the board are under pressure including the S&P 500 futures contract, is currently trading at 3154 down -1.00% while the Australian equity market, the ASX200 is down over 3.00%.
When asked by a colleague this morning if the broader risk market rally had finally hit a wall, my reply was I tend to tread warily after FOMC meetings. Often a spike in volatility follows the FOMC meeting as markets digest the implications of the Feds message for individual asset classes and sectors.
An example of this - the Feds forward guidance of 0% interest rates until 2022 does not bode well for bank earnings. This is best illustrated by the share price of the “Big Four” Aussie banks that have fallen harder than the broader market today, trading down between 4% and 6%.
Returning to the subject of the S&P500. After the very strong run higher that followed the break above 3000 highlighted in this article here today’s pullback is viewed as countertrend or part of a correction. It is not viewed as the start of a reversal.
In this context, buyers are expected to emerge on dips initially back towards the March highs, 3130/20 area, before more meaningful support 3070/60 that comes from the trendline from the March 2174 low. In this instance, a clear stop loss on longs would be offered on a daily close below the aforementioned trendline support.
Source Tradingview. The figures stated areas of the 11th of June 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.