S&P 500: Navigating Technical Signals and the June FOMC Decision
We saw major indices slipped on Tuesday (17 June 2025) as geopolitical tensions became the focus, impacting market sentiment negatively.
The market was in a somber mode after President Trump's sudden departure from the G-7 Summit and subsequent remarks on escalating tensions between Israel and Iran. Market volatility increased after concerns intensified with Trump's comments on Truth Social regarding Iran's Supreme Leader.
Ten S&P 500 Sector Fell Except Energy
The $S&P 500 Index (.SPX.US)$ has recently demonstrated notable resilience, surpassing the significant 6,000 level and maintaining an upward trend in the medium-long term, which reflects underlying investor optimism. However, a closer look at technical indicators reveals a negative Relative Strength Index (RSI) divergence, suggesting a potential deterioration in underlying momentum and a risk of a downward reaction despite the index's apparent strength.

All S&P 500 sectors fell except for energy, which gained 1.0%, driven by a 2.0% increase in WTI crude futures, now at $73.27.
Health care, down 1.6%, was the day's weakest sector amid discussions on pharmaceutical regulation and Medicaid spending cuts. Eli Lilly (LLY) dropped 2.02% following its acquisition of Verve Therapeutics (VERV), which jumped 81.50%.
The consumer discretionary sector fell 1.6%, affected by weak retail sales data. Notably, Lennar (LEN) declined 4.46% after disappointing earnings and housing market data.

Yields Lower On Uncertainty As Investors Flock To Safe-Haven Assets
This atmosphere of uncertainty saw a flight to safe-haven assets, lowering yields on 2-year and 10-year Treasury notes to 3.95% and 4.39%, respectively, while the U.S. Dollar Index rose 0.8% to 98.76.

Federal Open Market Committee (FOMC) Decision - 18 June
Looking ahead, the Federal Open Market Committee (FOMC) meeting, scheduled for June 17-18, is a pivotal event. While the committee is widely expected to maintain interest rates within their current range of 4.25%-4.50% , market attention will predominantly shift to the updated "dot plot" projections for interest rates.
Should these projections signal fewer rate cuts for 2025 than previously anticipated, influenced by persistent inflation concerns and the potential impact of tariffs, such a stance would likely be interpreted as hawkish. This could unsettle market participants and potentially amplify the existing technical vulnerabilities in the S&P 500. The extent to which the S&P 500's subtle weakness becomes more pronounced post-FOMC will largely hinge on the Federal Reserve's forward guidance.

S&P 500: Recent Performance and Technical Landscape (June 9-16, 2025)
The S&P 500 exhibited robust performance during the week of June 9-13, 2025, advancing by 1.5% and successfully breaching the psychological 6,000 level. This upward movement extended the significant momentum observed in May, which saw a 6.2% surge, bringing the index's year-to-date gain to 2%. The rally was broad-based, with Communication Services leading gains with a 3.2% increase, propelled by Meta's 7.8% surge, and the Technology sector rising 3%, with Micron Technology contributing significantly. Energy and Materials sectors also outperformed, recording gains of 2.2% and 1.4% respectively. However, the Consumer Discretionary sector was a notable drag, declining by 0.6%, primarily influenced by a substantial 15% plummet in Tesla's stock due to an escalating political feud.
An in-depth examination of the S&P 500's technical indicators reveals a complex picture. The index currently displays strong development within a rising trend channel in the medium-long term, typically signaling increasing optimism among investors and suggesting a continued upward trajectory. Key support levels are at 5830 points, with additional support at 5869.14 and 5781.79. Resistance levels are at 6120 points, with further resistance at 6053.30 and 6137.40. The psychological 6,000 level has proven to be a crucial pivot point.
However, a critical technical signal suggesting underlying weakness is the negative Relative Strength Index (RSI) divergence against the price. This occurs when the S&P 500's price continues to achieve higher highs, but the RSI registers lower highs. This divergence is a cautionary signal, indicating a potential "danger of a reaction downwards" , implying that the internal buying momentum supporting the current upward trajectory is waning.
Overall, the S&P 500's technical posture is characterized by a dichotomy. Robust price action and a rising trend channel underscore strong market resilience , while the negative RSI divergence points to diminishing internal strength. This makes the index vulnerable to a downward reaction if a significant catalyst emerges. The observation that strong performance in dominant sectors like technology can overshadow weakness in other large-cap components highlights a fragmented market health not immediately apparent from the headline index.
The June 2025 FOMC Meeting: Expectations and Economic Context
The upcoming FOMC meeting, scheduled for June 17-18, 2025, is a critical juncture. The policy statement and interest rate decision will be released, followed by the quarterly Summary of Economic Projections (SEP), or "dot plot," which provides individual FOMC members' anonymized forecasts for interest rates, inflation, and economic growth. A press conference led by Federal Reserve Chair Jerome Powell will follow, capable of significantly influencing market reactions.
As of its previous meeting on May 8, 2025, the FOMC maintained the federal funds rate at 4.25%–4.50%. For the June meeting, CME Group's FedWatch Tool indicates a near-unanimous 99.9% probability that the Fed will hold rates steady , making an immediate rate change unlikely to be a surprise factor.

However, the market's primary focus will be on the updated "dot plot". In March 2025, the dot plot indicated an appropriate year-end 2025 federal funds rate of 3.75% to 4%, implicitly suggesting approximately two quarter-point rate cuts. Analysts widely expect the June dot plot to signal fewer rate cuts for 2025.
If the Fed reduces its projected number of future rate cuts, it signals a more restrictive monetary policy path, which has historically led to sharp stock market declines. The market's reaction will hinge on the path of future rates signaled by the Fed's projections.
The Fed's decision-making is influenced by various economic data. May CPI data indicated a year-over-year headline inflation rate of 2.4%, slightly below expectations, though the Fed had previously raised its inflation forecast for 2025 to 2.5%, signaling persistent concern that inflation remains above its 2% target. While job growth slowed in May, the labor market generally "remains healthy for now". A significant factor is the potential inflationary ripple effect of new tariffs, which Fed officials have openly discussed.
The Fed faces a complex balancing act between slightly cooling CPI data and the explicit inflationary pressures from new tariffs. If Chair Powell emphasizes the potential future impact of tariffs, it could override mild dovish signals from recent CPI, leading to a more cautious or hawkish tone in the press conference and justifying fewer projected rate cuts.
Historical Precedent: S&P 500 Reactions to FOMC Communications
Historical market behavior provides valuable context. Hawkish signals from the Fed can lead to significant market downturns. For example, in December 2024, a "hawkish rate cut" (a 0.25% cut accompanied by a signal of fewer expected cuts for 2025) caused the S&P 500 to fall nearly 3%.
This reaction underscores that the outlook for future monetary policy can exert a more profound influence on market sentiment than immediate rate adjustments. Conversely, when Fed communications align with or are more dovish than market expectations, it can support equities, as seen in March 2025, when the Fed maintained its estimated two rate cuts, helping the S&P 500 climb 1.08%.

The Fed Chair's press conference has become a significant driver of market volatility, with volatility approximately three times greater during Chair Powell's press conferences compared to his predecessors. Since March 2020, markets have frequently moved in the opposite direction during Powell's press conferences than they initially moved following the FOMC statement release. His nuanced language or responses can reverse initial market interpretations and lead to substantial shifts in the S&P 500's value. Given the S&P 500's current negative RSI divergence, a hawkish tone from Powell could provide the necessary catalyst for a significant downward move.

Outlook: Will S&P 500 Weakness Intensify Post-FOMC?
The S&P 500's response to the June FOMC meeting will be highly contingent on the Fed's communication, particularly the updated "dot plot" and Chair Powell's press conference.
Scenario A: More Hawkish-than-Expected Fed:If the "dot plot" signals fewer than two rate cuts for 2025 (e.g., one or zero cuts) and Chair Powell emphasizes persistent inflation risks, particularly from tariffs , this would likely lead to intensified technical weakness for the S&P 500. Given the existing negative RSI divergence and proximity to record highs, such a signal could trigger significant profit-taking, with the S&P 500 potentially breaking below immediate support levels like 6,000 and 5869.14.
Scenario B: More Dovish-than-Expected Fed:While less probable, if the "dot plot" maintains or increases the number of projected rate cuts, and Chair Powell adopts a more optimistic tone on inflation, this could inject new bullish momentum into the S&P 500, potentially overriding the negative RSI divergence in the short term. The index could experience a renewed rally, pushing past resistance levels and potentially setting new record highs.
Scenario C: Fed Meets Market Expectations (Neutral Outcome):In this scenario, the Fed would hold rates steady, and the "dot plot" would signal a modest number of cuts largely aligned with market expectations. Chair Powell's commentary would be balanced. A neutral outcome would likely lead to continued choppiness and range-bound trading, with the existing negative RSI divergence persisting but not immediately translating into a clear downward trend.
In a hawkish outcome, increased selling pressure is anticipated, potentially leading to a breakdown of the rising trend channel and a clear test of major support levels. A dovish outcome would likely generate strong upward momentum. A neutral outcome would result in continued consolidation. Given the S&P 500's strong rally to near record highs (just under 25% from April lows) and the existing negative RSI divergence , a hawkish FOMC outcome could trigger significant profit-taking, amplifying the subtle technical weakness into a clearer downward trend.
Beyond the FOMC meeting, subsequent inflation data (CPI and PCE reports) will be critical, as will any significant deterioration in labor market data. Persistent political drama (e.g., Trump-Musk feud) and escalating US-China trade tensions introduce continuous uncertainty and can independently weigh on sectors or overall market sentiment. Corporate earnings reports will also remain a fundamental driver.
My Strategy and Portfolio Rebalancing
I would be deploying a movement to conduct a granular, sector-specific, and even individual stock-by-stock analysis rather than relying solely on broad index movements.
There is one advanced technical tools we can actually use to likestock screeners with sophisticated filters (e.g., Relative Strength Index, moving averages)to identify individual stocks showing clearer signs of weakness or strength, aiding in more precise trading and investment decisions.
Here is the example that I have after I set signal to most active, the screener filter using EMA (exponential moving average), Price above EMA12, Price above EMA26, Price above EMA50 and Price above EMA200.
As we can see we have some of the technology names still showing strong signals, like $NVIDIA (NVDA.US)$ $Amazon (AMZN.US)$ $Alphabet-A (GOOGL.US)$ $Palantir (PLTR.US)$ $Advanced Micro Devices (AMD.US)$ $Arm Holdings (ARM.US)$ $SoFi Technologies (SOFI.US)$

Summary
Navigating the current market environment requires a strategic and adaptive approach. Investors are advised to review portfolio allocations, especially in growth-oriented sectors, and consider hedging strategies to mitigate downside risk.
Maintaining a higher cash position could provide flexibility to capitalize on pullbacks. A granular, sector-specific, and individual stock analysis is crucial, given the impact of idiosyncratic events. Employing advanced technical tools like stock screeners can enhance the ability to identify stocks showing clearer signs of weakness or strength.
If a Hawkish Outcome Occurs:Consider a defensive positioning, rotating into sectors less sensitive to interest rate hikes (e.g., utilities, consumer staples) and reducing exposure to high-beta growth stocks.
If a Dovish Outcome Occurs:In this less likely scenario, maintaining or increasing exposure to growth-oriented sectors like technology and communication services would be viable, while remaining vigilant for signs of market overextension.
If a Neutral Outcome Occurs:A cautious, wait-and-see approach is needed, focusing on fundamentally strong companies with resilient business models. Investors should be prepared for shifts in sentiment driven by subsequent economic data or geopolitical events.
Regardless of short-term volatility, maintaining a long-term investment horizon remains a foundational principle, as historical market cycles demonstrate consistent recovery and new highs.
Appreciate if you could share your thoughts in the comment section whether you think neutral market reaction would be coming as Fed is expected to set the interest rates unchanged.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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BeckyBoo : Negative RSI divergence is a red flag. Think we'll see a pullback?
romancer : You leaning hawkish or dovish?
nerdbull1669 OP BeckyBoo : I think a pullback might come but I see it as an opportunity to look at stocks to buy
nerdbull1669 OP romancer : I leaning towards dovish.