S&P 500: Market Positioning Ahead of the Fed Decision

In an earlier note dated 2 December, we highlighted that December has historically been a supportive month for the S&P 500 (US SPX 500 mini on FXOpen). Long-term data shows that:

• since the 1950s, the index has posted gains in December in more than 70% of years;
• the average rise for the month is close to 1%.

As attention now turns to the Federal Reserve’s rate decision and Chair Powell’s press conference, another historical pattern is worth noting. Media sources point out that in every instance so far where equities were trading near record highs and the Fed cut interest rates, the S&P 500 went on to rise over the following 12 months — a record of 20 out of 20 cases.

With the index currently hovering near its all-time highs and markets expecting rate cuts, there is a chance this pattern could extend to a 21st occurrence.

Looking at the 4-hour chart of the S&P 500 (US SPX 500 mini on FXOpen), price action suggests the market is in wait-and-view mode. The index is trading close to where it stood at the beginning of December, reflecting a sense of caution ahead of the central bank’s announcement.

Technical Perspective on the S&P 500

Bullish considerations:

• the index has held above the 6785 level, which may now serve as a support area;
• price has broken out of a downward-sloping channel (previously marked in red);
• a rising channel formed in ahead December, pointing to restrained optimism as investors position ahead of key news.

Bearish considerations:

• the late-October record high remains a potential psychological ceiling;
• the pullback viewn yesterday indicates tradeers are prepared to step in if the news provides a trigger.

In summary, the S&P 500 appears to be in a classic “pause before the move”. Traders should be prepared for sharp swings in volatility later today, particularly from 22:00 GMT+3 onwards, when the Fed’s decision and commentary are released.

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