US stocks closed higher overnight even though FOMC delivered an “uncommon” mega hike of 75bps. Fed Chair Jerome Powell also indicated at the post-meeting press conference that “either a 50 basis point or a 75 basis point increase seems most likely at our next meeting” while “ongoing rate increases will be appropriate.”
The recovery in stocks is more seen as a “sell-on-rumors-cover on news” move. Fed delivered what the markets have expected and the selloff was already done earlier in the week. Also, some would give a nod to Fed’s determination to combat inflation and create the conditions for a soft-landing, even though it’s a big challenge.
The condition for a stronger rebound in S&P 500 is there, give that it’s close to 3666.44/3672.97 cluster projection (61.8% projection of 4637.30 to 3810.32 from 4177.51 at 3666.44, 161.8% projection of 4818.62 to 4222.62 from 4637.30 at 3672.97). Yet, SPX will need to break through the top end of the latest gap at 3900.16 to indicate stabilization first. Otherwise, risk will remain heavily on the downside. Deeper fall into support zone between 3195.28 and 3505.24 (61.8% and 50% retracement of 2191.86 to 4818.62) is too early to be ruled out at this point.
