The S&P 500 has rebounded from recent losses and is gaining traction due to anticipated Federal Reserve rate cuts. The market is expecting three rate cuts totalling 68 basis points by year-end. There is also an 8% chance of a 50 basis points cut in September, potentially contingent on a soft Consumer Price Index (CPI) report, which could further elevate the stock market towards new highs. <\/p>\n
Long-term growth prospects remain optimistic, despite economic uncertainties earlier in the year. The expectation of rate cuts and a stabilising labour market, previously unsettled by policy changes, could stimulate economic activity beneficial for the stock market. <\/p>\n
Technically, the S&P 500 is trading within a rising wedge pattern on the daily chart, showing potential for both upward momentum and pullback risk. On the 4-hour chart, a minor upward trendline indicates bullish momentum, with buyers likely reinforcing positions at the trendline. The 1-hour chart highlights a support zone around the trendline and the 6,520 level, where buyers and sellers are preparing for potential moves to new highs or further drops, respectively.<\/p>\n
Key data releases include the US CPI report, Jobless Claims figures, and the University of Michigan Consumer Sentiment report.<\/p>\n
We are seeing the market completely shrug off bad news, focusing instead on the promise of lower interest rates from the Federal Reserve. The soft Non-Farm Payrolls report from September 5th, which came in at just 95,000 jobs added, was quickly forgotten. This dovish bias continues to be the primary tailwind for equities.<\/p>\n
This morning’s Consumer Price Index report further fueled this optimism, showing core inflation rose just 0.1% last month against expectations of 0.3%. Consequently, market pricing for rate cuts has intensified, with CME FedWatch probabilities now suggesting more than 75 basis points of easing by December. There’s even growing talk of a 50 basis point cut this month, a scenario that seemed unlikely just weeks ago.<\/p>\n
For derivative traders, this environment suggests buying call options on any pullbacks toward established support levels. We are looking at the upward trendline around the 6,520 mark on the S&P 500 as a prime area to initiate bullish positions. The goal is to ride the momentum created by these positive rate-cut expectations.<\/p>\n
However, we must also consider the rising wedge formation on the daily chart, which often precedes a correction. As the S&P 500 approaches the upper boundary of this pattern, purchasing put options offers a well-defined risk to protect against a potential downturn. With the VIX currently suppressed at a low 13.5, far below its historical average of around 19, volatility-linked products also present a cheap hedge against a sudden reversal.<\/p>\n
We see the market looking past the frozen labor market that we navigated in the first half of the year, viewing it as a temporary issue. The consensus is that upcoming rate cuts will thaw economic activity and spur growth in the final quarter. This forward-looking view is why fundamentals seem disconnected from the market’s strong performance.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" S&P 500 rebounds on expected Fed rate cuts; bullish momentum grows despite economic uncertainty and technical risks.<\/p>\n","protected":false},"author":62,"featured_media":16988,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-30600","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/30600","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=30600"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/30600\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16988"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=30600"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=30600"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=30600"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}