S&P500: Fed's position becomes more restrained _31/03/2016

Trading recommendations

Sell ​​Stop 2048.0. Stop-Loss 2060.0. Targets 2045.0, 2035.0, 2025.0, 2000.0

Buy Stop 2070.0. Stop-Loss 2050.0. Targets 2075.0, 2090, 2100.0


Technical analysis

On Tuesday, the S&P500 broke the resistance level of 2045.0 (100% Fibonacci level of the correction to decrease since the beginning of 2016) and the positive dynamics is preserved. D.Yellen words about the desirability of a smooth increase of the interest rates in the US brought down the US dollar and supported risky assets such as stocks.

On Thursday, with the opening of the trading session in Asia, there are some correction and reduction of S&P500 index on profit taking and ahead of tomorrow NFP.

On the 4-hour chart indicators OsMA and Stochastic turned into short positions, but on the daily and weekly chart indicators are located on the side of buyers, signaling, thus, a correction within an uptrend and channel on 4-hour chart.

The downward correction is likely to short-term, and probably a decrease in levels of 2045.0 (100% Fibonacci level and EMA50 on the 4-hour chart), 2035.0 (lower line of the ascending channel).

Only after the price fixates below 2000.0 (EMA200, EMA144 on the daily chart) could talk about returning to the downtrend.

Breakthrough levels of resistance zone near 2070.0 (recent highs), 2075.0 (the upper boundary of the rising channel) will create conditions for the further growth of S & P500 index.

Support levels: 2045.0, 2035.0, 2025.0, 2000.0

Resistance Levels: 2070.0, 2075.0, 2100.0


Overview and Dynamics

At its meeting on March 15-16, the Fed left interest rates unchanged and lowered its forecasts to tighten monetary policy in the current year to the end of 2018.

Now the United States is projected to increase two key interest rates in 2016 to 0.875%. Previously it was thought that the key interest rate will be increased to 1.375% by the end of 2016, up to 2.375% by the end of 2017 and to 3.25% by the end of 2018.

As you know, on Tuesday, Fed Chairman D.Yellen in his speech signaled a low probability of increasing rates in the US in April, citing the substantial economic and financial uncertainty in the world, which creates risks for the sustainable recovery of the US economy. This D.Yellen believes that the US economy is in good condition and will survive in the current difficult conditions prevailing in the global economy. Meeting of the Fed's monetary policy is scheduled for April 27th.

And now, after the words D.Yellen, investors will be difficult to return to the active dollar purchases.

Since mid-February, the price of the S & P500 rose steadily, and to date, the index is fully regained all the losses incurred since the beginning of the year after the collapse of world stock indices on the background of the fall of the Chinese stock market and the devaluation of the yuan. Recovery of the global and US stock indexes, including index S & P500, largely contributed to how the Chinese government's efforts to stabilize the Chinese stock market and the yuan, and the Fed's penchant for softer monetary policy in the US, which was announced earlier in December 2015.

Comments D.Yellen talking about the Fed's penchant for softer monetary policy in the United States and a sufficiently stable state of the US economy, will give the US stock indices positive momentum, pushing them towards the highs of last year.

Now the attention of market participants will be focused on tomorrow's economic data from the United States. At 12:30 (GMT) will be published data on the Non-Farm PayRolls and unemployment, and at 14:00 will leave other important indicators - Purchasing Managers Index (PMI) for the manufacturing index and a gradual acceleration of inflation from the Institute for Supply Management (ISM ) for March. Positive data is expected projected to allow market participants to go back to buying the dollar and will support the American stock indices.