S&P 500 Index Hits Record After Major News

Yesterday, significant news regarding US inflation was released. According to ForexFactory:
→ Year-on-year Consumer Price Index (CPI): actual = 3.3%, forecast = 3.4%, previous = 3.4%;
→ Month-on-month CPI: actual = 0.0%, forecast = 0.1%, previous = 0.3%;
→ Month-on-month Core CPI (excluding food and energy): actual = 0.2%, forecast = 0.3%, previous = 0.3%.

These official figures indicate that US inflation is slowing down.

This bolstered expectations that the current tight monetary policy might ease. Consequently:
→ the dollar weakened (as we anticipated yesterday while analysing the USD/CAD chart);
→ stock markets surged. Notably, the S&P 500 index (US SPX 500 mini on FXOpen) surpassed 5,444, rising approximately 1.1% within two hours following the inflation news release.

Later that day, the Fed's rate decision and Powell's press conference took place:
→ the Fed rate remained unchanged at 5.5% (as expected);
→ Jerome Powell signalled a possible rate cut before the end of the year, hinting at the possibility of two cuts.

Today's technical analysis of the S&P 500 index (US SPX 500 mini on FXOpen) shows that:
→ the market is moving within an ascending channel (shown in blue);
→ before the news release, the price was near the channel’s median, but it rose towards the upper boundary in the evening;
→ the price crossed the psychological level of 5400, and the RSI entered overbought territory.

Will the rally continue? As the chart shows, the decline from B to C is less than 50% of the rise from A to B, which can be interpreted as a normal correction within an uptrend.

However, the sustainability of this trend will depend on the S&P 500 index (US SPX 500 mini on FXOpen) maintaining its position above 5400. Note the 5300 level: it acted as support from 16-22 May but became resistance on 3-4 June.

Support for bulls in keeping the price above 5400 could come from the median line and more dovish news regarding inflation and Fed rates.