US stock market recovering, waiting for Fed’s policy directions

The US stock market recently recovered as a result of UBS' acquisition and merger with Credit Suisse, as well as efforts by central banks throughout the world to rebuild trust in the financial system.

By last Monday, the Dow had risen 382.6 points, or 1.2%; the S&P500 had risen 34.9 points, or 0.9%; and the NASDAQ had risen 45 points, or 0.4%, as investors became more optimistic about the potential direction of the Fed's monetary policy, which may delay interest rate hikes following the banking crisis.

While several bank stocks fell on Monday morning, they recovered by the end of the session as concerns over high-risk cross assets lessened following Credit Suisse's historic rescue over the weekend.

The Fed's monetary policy meeting on Thursday is undoubtedly the event to watch this week. Investors expected the Fed to raise rates by 50 basis points before the chaos in the banking sector or at the beginning of the month, but currently about 80% of the market expects the Fed to take the safest route and adjust to market expectations of 25 points later this week because the risk of a halt in interest rates causing inflation to accelerate again remains too high.

According to CME's FedWatch Tool, Fed funds (FFR) futures now show a 28.4% possibility that the Fed will keep rates at 4.5%-4.75% and a 71.6% chance that rates will be raised by 25 basis points. Meanwhile, the 10-year Treasury yield increased to 3.4866% from 3.397% on Friday, while two-year short-term yields, one of the most traded assets in the world and a proxy asset for Fed policy predictions, increased to 3.9700% from 3.846% on Friday. Whether the Fed raises interest rates by 25 basis points as expected by the market or keeps existing interest rates, the overall US stock market may climb over this period.

Other interesting economic data affecting the US stock market this week include Existing Home Sales, which are expected to be 4.17 million, up from 4.00 million, and Initial Jobless Claims, which are expected to be 197,000, up from 192,000, and are scheduled to be published this evening on Tuesday and Thursday.

Data for Technical Analysis (5H) CFD US 500 [S&P 500]

Resistance : 3963.4, 3967.1, 3972.9

Support : 3951.8, 3948.1, 3942.3         

5H Outlook

1H Outlook

Source: Investing.com                               

Buy/Long 1 If the support at the price range 3944.8 - 3951.8 is touched, but the support at 3951.8 cannot be broken, the TP may be set around 3965.0 and the SL around 3941.0, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 3963.4 - 3970.4, TP may be set around 3981.0 and SL around 3951.0, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 3963.4 - 3970.4 is touched, but the resistance at 3963.4 cannot be broken, the TP may be set around 3950.0 and the SL around 3973.0, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 3944.8 - 3951.8, TP may be set around 3936.0 and SL around 3964.0, or up to the risk appetite.       

Pivot Points Mar 21, 2023 03:21AM GMT

Sources: Investing 1, Investing 2