S&P 500 rides uptrend channel with Fed easing support

THE S&P 500 has staged a strong rebound from early-2025 tariff-related swings and is firmly trading in a bullish channel. After plunging on US President Donald Trump’s April tariffs, the index rebounded nearly 20 per cent and erased its year to date losses by mid-2025.

By early September, the index was trading around the 6,500 to 6,600 range. Since May 2025, price action has carved higher highs and higher lows, creating an uptrend channel. Short-term momentum remains positive, albeit the recent smaller daily candlestick bodies – a sign that bulls are pausing at higher levels.

Technical levels to observe

One key level to watch is the 20-day simple moving average (SMA) at the 6,510 level. This shorter SMA has supported recent pullbacks and currently acts as a dynamic support level. The next support level to look at is the 50-day SMA around the 6,414 level. This 50-day SMA acts as a deeper floor, critical for keeping the uptrend channel. On the upside, the uptrend channel’s upper boundary around the 6,850 mark represents the nearest resistance level where sell-off pressure is likely to intensify.

As the index steps into uncharted waters with its strong performance this year, the 161.8 per cent Fibonacci extension can act as a potential guide for short to medium term upside resistance, pointing towards the 6,970–7,000 range with 7,000 being a strong psychological resistance level.

From a macro perspective, monetary policy is tilting dovish, which underpins the bullish technical setup. At the September FOMC meeting, the Fed cut rates by 25 basis points and envisage two more quarter-point cuts by year-end. However, this path of easing has already been priced into equities, when US stock futures ticked higher and bond yields fell sharply after the FOMC meeting. This easing stance is largely in response to signs of softness in the labour market.

If the trend persists (or worsens), it will reinforce the Fed’s dovish stance and support further rate cuts. In contrast, any surprise leap in hiring or inflation could upset the bullish momentum. Though inflation rate remains above the Fed’s 2 per cent target, any signs of cooling, combined with subdued job gains, will support rate-cut expectations.

Outlook

Overall, the technical backdrop remains bullish, underpinned by Fed easing expectations and a broad market uptrend. If the S&P 500 can stay above its near-term supports, the path is open towards the upper trendline near the 6,850 level and the Fib-extension zone near 6,970. In contrast, a decisive break below the 50-day SMA would invalidate the near-term uptrend and could trigger a deeper correction, potentially towards the 6,200 area, a previous support zone.

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The writer is manager, dealing and investor education, at PhillipCapital