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Stock markets enjoy gains following Fed meeting

Equity markets have made headway following the Fed’s rate hike, as Powell moves to rule out 75 bps hikes.

​FTSE 100 pushes towards 7600

The fall in this index during the course of April was much less dramatic than that for US markets, and so the bounce here in the wake of the Federal Reserve (Fed) is much more modest.

However, the index recovered from yesterday’s losses and pushed back to unchanged overnight, and now looks to move on towards the previous highs in April at 7670 and 7690.

A break above 7700 puts the index on course for 7730, last seen in 2019, and then on to the 2018 highs at 7903.

A reversal below 7500 might suggest some further short-term weakness down towards 7400 and then 7300.

DAX moves above 50-day SMA

The Fed’s move bolstered stocks around the globe, with this index no exception.

Having made small gains before the decision, the index was able to push higher in the wake of it, and closed above its 50-day simple moving average (SMA). From here the next target is the 14,500 peak from late April, which saw the index spike higher and then retreat.

Before this, trendline resistance from the late March high at 14,900 comes into view. A breakout above this would mark a bullish development, although we still need to see a higher high to finally put an end to the March/April downtrend.

If the index fails to break trendline resistance and turns lower, then the late April low at 13,600 comes back into view, with a drop below this bringing the possibility of further losses in the direction of the March low.

Dow soars back to 34,000

Fed chair, Jerome Powell’s comment ruling out 75 basis point hikes by the Fed appeared to provide the spark for a major rally in US stocks, including the Dow, which went from near 33,000 to 34,000 in the space of a couple of hours.

Crucially this means that the wide area of support around the February and March lows once again provided the foundation for an equity bounce. If the price can push on above the 50-day SMA (34,094) then the 34,500 and 200-day SMA at 34,976 come into view.

A reversal back below 33,500 could signal that sellers are regaining control, but a bigger move to the downside would need to push below April’s low at 32,500, and then on below February’s low at 32,200.

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