E-mini S&P 500 Index (ES) Futures Technical Analysis – Traders Hoping for Clarity from Federal Reserve

September E-mini S&P 500 Index futures are edging higher at the mid-session on Wednesday shortly before the U.S. Federal Reserve’s monetary policy and interest rate decisions. Investors are bracing for a bigger interest rate hike by the Federal Reserve to tame persistently high inflation.

The largest S&P sectoral gainers are consumer discretionary and communication services, while energy declined 0.7%.

Beaten-down growth and financial stocks are finding some buyers, while market heavyweights Tesla Inc, Alphabet Inc, Microsoft Corp and Amazon.com Inc added between 2% and 4.2%.

At 17:30 GMT, September E-mini S&P 500 Index futures are trading 3776.75, up 36.50 or +0.98%. The S&P 500 Trust ETF (SPY) is at $377.33, up $3.46 or +0.93%.

Given the recent sell-off, today could turn out to be a “Sell the Rumor, Buy the Fact” trading session. Be prepared for a volatile, two-sided trade.

Aggressive Fed Rate Hike On-Tap

Investors have dramatically raised their bets that the U.S. Federal Reserve will raise interest rates by 75 basis points (bps) rather than 50 bps on Wednesday, a swing in expectations that has fueled a violent selloff across world markets.

Expectations for a 75-bps hike at the June meeting jumped to 89% on Tuesday from only 3.9% a week ago, according to CME’s Fedwatch Tool. Consequently, expectations of a 50 bps rate hike on Wednesday have melted to 11% from a surefire bet a week earlier, Reuters reported.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 3708.50 will signal a resumption of the downtrend.

The main trend will change to up on a move through 4204.75. This is highly unlikely, but due to the prolonged move down in terms of price and time, the market is ripe for a potentially bullish closing price reversal bottom. This won’t change the main trend to up, but it could trigger the start of a 2 to 3 day correction.

The minor range is 4204.75 to 3708.50. Its retracement zone at 3956.75 to 4015.25 is the nearest upside target.

Daily Swing Chart Technical Forecast

Trader reaction to 3758.00 is likely to determine the direction of the September E-mini S&P 500 Index into the close on Wednesday.

 Bullish Scenario

A sustained move over 3758.00 will indicate the presence of buyers. Taking out 3807.50 will indicate the buying is getting stronger. This could create the near-term upside momentum needed to challenge 3956.75 – 4015.25.

Bearish Scenario

A sustained move under 3758.00 will signal the presence of sellers. Taking out 3708.50 will indicate the selling is getting stronger. This could lead to a test of the March 4, 2021 main bottom at 3678.75.

If 3678.75 fails as support then look for the selling to possibly extend into the February 1, 2021 main bottom at 3614.75.