Fed Hikes Rates for First Time in Three Years as SPX Holds a Six-Week Flag Pattern: Key Levels to Watch

Fed Raises Rates and Signals More to Come

As widely expected, the Federal Reserve raised the fed funds target range to 3.75%-4.00%, marking its first rate hike in three years. Because the decision was largely priced into markets, investors focused more closely on the Fed’s updated economic projections and Chair Kevin Warsh’s tone at the press conference. The updated projections pointed to a more inflation-focused Fed. Policymakers raised their inflation forecasts and penciled in another expected rate hike before year-end. Beyond this year, however, the outlook is less settled. Eight of the 18 officials projected one more rate increase in 2027, while the remaining respondents expect no change or a cut.

Markets initially interpreted the Fed’s message as modestly more hawkish than expected. Equities declined and bond yields rose following the announcement, though stocks later rebounded. A modest rally on Thursday only partly offset mostly negative daily results the rest of the week, and the S&P 500 on Friday closed with a fractional overall decline for the second week in a row, while the Nasdaq ended fractionally higher.

Wednesday’s Fed rate hike weighed on bond prices, sending Treasury yields modestly higher. At Friday’s close, the 10-year yield was up slightly for the week at 5.01%, while the 30-year was at 5.33%, slightly lower.

Oil Surges Toward $106 as Middle East Tensions Drive Prices

Oil traded in a wide range, with U.S. crude peaking above $106 per barrel on Tuesday before slipping below $100 on Thursday and Friday. Oil remained near a four-month high on Friday afternoon, largely driven by ongoing developments in the Middle East.

My Technical Read: A Bullish Flag That May Break This Week

From a technical standpoint, nothing has been resolved, as the S&P 500 remains in a six and a half week flag-type consolidation. However, it should be considered a continuation pattern, since it follows a rapid rise in early August within an overall longer-term rising channel. The SPX did spike down near 7,500 mid-week before the Thursday and Friday rebound. That level, 7,500-07, is now considered key short-term support and a violation of that could trigger a much more severe decline.

Until then, I am considering the current pattern more bullish and constructive for a possible upside breakout. We may see the market’s decision as early as this coming week.

Key SPX and NDX Technical Levels to Watch

SPX resistance near 7,675-77, 7,755-70, 7,816-20, and the 7,950-8,000 zone. Chart support remains near 7,600-7,610, 7,560-65, 7,500-05, and 7,375-90.

NDX resistance at 29,750, 30,200, and 30,650. Support near 28,750-55, 28,200, 27,200, and the 26,175-200 zone.

In any case, as we always do at TheTechTrader.com, we’ll “Trade What We See, Not What We Think.”