The S&P 500 futures (CME: ES) tumbled after the US Federal Reserve raised their interest rates by another 25bps. The hike aligned with expectations, while the Fed signalled a potential pause in their next monetary meeting. While these developments usually pose nicely for the equity market, the futures nosedived close to 1.2% before recovering some of the selloffs. 

Although the door remains open for a pause in the next monetary meeting, Jerome Powell reiterated that inflation remains too elevated, which makes it premature to consider the end of the rate hike cycle. On top of that, another regional bank PacWest crashed by over 50% as they reported issues overnight that led them to consider strategic options, including a potential sale. The futures reacted unfavourably as the fears around the banking sector’s health continued to sour the market’s sentiment. 

Technical 

On the 4H chart, the futures found support at 4,079.25 (S1) in the aftermath of the selloff, where a rebound shifted the futures back toward the daily pivot resistance at 4,123.25. If the bulls break through the pivot point, they could generate momentum to test the support level at 4,135.25 before moving to higher resistance at 4,151.25 (R1). With the current macroeconomic fear around a potential recession, the futures may require further fundamental backing to move higher. On Friday, a favourable Non-Farm Payroll report could be the catalyst to force the futures higher toward 4,170.25 and 4,207.50. 

Conversely, if the pivot resistance holds, the bears could pressure the retracement to force a retest of the support at 4,098.75. While strong support exists at 4,079.25, an unfavourable NFP report could provide the necessary momentum to break this level down and aid the bears toward lower support at 4,060.50 and 4,040.50. 

Summary 

Fears around the banking sector and an economic slowdown continue to pressure the equity market, despite signals around a potential rate pause in the Fed’s next meeting. The futures may trade in a narrow range on Thursday before the Non-Farm Payrolls report on Friday, which is sure to give the market further cues into the direction of the economy. 

Sources: Koyfin, Tradingview, Reuters