FOMC has kicked of the trading session with a little bit of a fluster but for the vast majority of traders it was nothing unexpected, and the sentiment in the FOMC statement was less bullish compared to the previous months one. The FED continues to believe in the US economy which comes as no surprise, and a return to 2% inflation. However, with a new president the FED is looking to remain cautious in light of the economic policies that are likely to come about. Jumping the gun and lifting rates could be costly in the long run with very little data before a storm is about to happen, and this is nothing new from a FED which has long been cautious after the global financial crisis. So while employment continues to improve, inflation is the only thing lacking at this stage and expectations will certainly increase for a rate rise if inflation figures also improve in the short to medium term. But with manufacturing picking up, as can be shown in today’s manufacturing PMI reading of 56.0 (exp 55.0)  and not seen this high since the end of 2014 I would expect inflation expectations to increase.

For the fast moving market it would seem the focus is on the USD, which it is, but also on the S&P 500 which at present is looking rather interesting. Obviously Trump has had a large impact on the equity markets with many of them rising in the wake of his election and the added expectations around his positive policies. However, at the same time many feel that with the FED lifting interest rates over the next 12 months we could see cheap liquidity drain out of equity markets and chase returns elsewhere, which might bring about the bears.

The S&P 500 looks to have almost run out of steam from the bulls perspective, as technically it has very little momentum and looks to be ranging almost at this stage. The only saving grace is traders keep pushing it above the 20 day moving average showing that they still believe the bulls will take back control currently. Resistance at 2300 has become the magic number to push through, but realistically it’s a hard ask unless we see Trump come to the table with positive policies to boost the US economy. If we don’t see much change then inflation may pick up and the FED will take a swing and look to lift interest rates putting pressure on the equity markets. Right now support at 2278 and the 20 day moving average are playing a big role in holding back the S&P. A fall below this level to 2264 could put pressure on the market and entice the bears to take a large swing as we’ve previously seen with S&P corrective movements.