The S&P 500 experienced a slight pullback during Wednesday's trading session, with investors taking profits ahead of the highly anticipated Federal Open Market Committee (FOMC) meeting. Market participants are keen to learn what course of action Federal Reserve Chairman Jerome Powell and his colleagues will take concerning interest rate hikes. The central question is whether the Fed will opt for a 25 or 50 basis point increase.
Jerome Powell has remained steadfast in advocating for a tight monetary policy to combat inflation. However, the recent banking crisis raises questions about whether the Fed will continue to prioritize fighting inflation or yield to market pressures. The outcome of the FOMC meeting could significantly impact the S&P 500's future direction.
Currently, the 200-Day Exponential Moving Average (EMA) is just above the 4000 level, a psychologically significant number that has seen substantial action in the past. If the S&P 500 pulls back further, it's likely that buyers will step into the market at this level. However, a break below 4000 could trigger a move down to the 3900 level, which has recently offered support, followed by the 3800 level. On the other hand, the upside potential faces resistance around the 4100 level.
A break above 4100 would open the door for a more significant move. However, it's challenging to envision a scenario where the market surges unless the Federal Reserve caters to Wall Street's desire for cheap money. At present, the market appears to be trading within a larger consolidation area, with increased volatility and continued choppiness. This trend is likely to persist moving forward, but the Fed's decision could offer some much-needed clarity by the end of the day. Until then, investors can expect the choppy back-and-forth behavior to continue.
Ultimately, the S&P 500's performance remains uncertain as investors eagerly await the outcome of the FOMC meeting. The Fed's decision on interest rate hikes and its approach to tackling inflation amid a banking crisis will play a crucial role in shaping the market's trajectory. For now, the S&P 500 remains within a broader consolidation area, with investors bracing for increased volatility and choppiness in the days ahead.
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