Yesterday’s close: Settled at 3008.50, up 0.50
Fundamentals: The Fed met expectations yesterday by cutting rates and although U.S benchmarks swung briefly in both directions, they are right where they were leading up to the policy decision. FOMC members poured cold water over the action by not forecasting additional cuts this year. In contrast, the market is pricing in a coin flip that we see another cut in October and a 60% probability they cut again before year-end. This is an interesting divergence and one that could ultimately hand the torch to a growth-dependent market instead of an easing dependent market. The Fed quietly raised their GDP forecast to 2.2% from 2.1% and we have said here for the last two months, this market wants to see better data in order to trade higher. Now, with 50 basis points of cuts in the rear-view mirror, there is no time like the present to begin making that transition. Still, the difficult anecdote will be fighting the deteriorating growth abroad; dismal China data was the latest Sunday and the OECD lowered their global GDP forecasts this morning to 2.9% from 3.2%. Outside of manufacturing, U.S data has been broadly turning a corner. Today, Philly Fed Manufacturing is out at 7:30 am CT and this would certainly be a great start. Weekly Jobless Claims are also due at 7:30 am CT and Existing Home follow at 9:00.
Technicals: Both the S&P and NQ have stuck their necks out above major three-star resistance, but the struggle is still real; they must secure a decisive close out above these levels at 3008.50 and 7908.25-7918, most importantly the S&P. Sharp swings to the downside post-Fed decision battled at strong support in the S&P at 2983.50 with major three-star support just below at 2975, for the NQ this was 7798.25-7805. These levels were not violated and ultimately led to a relief rally. The range is still very confined but if the bulls keep the above 3000 in the S&P and 7870-7893 in the NQ, we are likely to see a surge to new highs before the end of the week. A close below these minor levels today will reinvigorate the wave of weakness that begun on Sunday night open and reinvigorate geopolitical profit-taking ahead of the weekend.
Resistance: 3008.50***, 3013.75*, 3027.25-3032.50***, 3044-3057.75***
Support: 3000*, 2991-2993**, 2975-2980.75***, 2957.25-2958.75**, 2938.50-2943.75***
Resistance: 7908.25-7914.50***, 7960.25-7963.25***, 8014.50-8037***, 8072***
Support: 7870-7893*, 7798.25-7805***, 7739-7761.50**, 7687**, 7580.75-7612.50***