S&P 500 extends rally to record 6,664 as Fed cuts and geopolitical talks boost sentiment

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S&P 500 Fed cuts and U.S.-China talks lift sentiment

Highlights

- S&P 500 closed at 6,664.37, marking another record high with a 0.20% weekly gain.

- Fed’s first-rate cut of the year and easing expectations fueled equity momentum.

- RSI at 73.89 signals overbought conditions, raising the risk of near-term consolidation.

S&P 500 index remains inside a rising channel that has guided price action since May, testing the channel’s upper boundary. This signals strong bullish momentum, though also raises the risk of short-term overextension. Immediate support lies at the 20-day EMA of 6,586, followed by the 50-day EMA at 6,512. Deeper defenses come in at the 100-day EMA at 6,408 and the 200-day EMA at 6,239, both of which have historically absorbed corrective moves.

S&P 500 index price dynamics (Source: TradingView)

Momentum indicators suggest caution. The RSI has climbed to 73.89, firmly in overbought territory. While this highlights the strength of buying pressure, it also increases the probability of short-term consolidation before the next leg higher.

Policy and politics shape market backdrop

Monetary easing remains the dominant driver of sentiment. With the Fed signaling further cuts amid weakening labor conditions and subdued inflation expectations, real yields are likely to stay under pressure. This continues to provide a supportive environment for equities. Investors now await this week’s release of the personal consumption expenditures price index, the Fed’s preferred inflation gauge. A softer reading could cement expectations of consecutive rate cuts in October and December, further fueling the equity rally.

Geopolitical developments also played into market sentiment. President Trump’s extended call with Chinese President Xi Jinping touched on trade, fentanyl controls, and the fate of TikTok in the U.S. While no firm agreements were announced, markets interpreted the dialogue as a tentative easing of tensions. Sectors tied to technology and trade policy remain particularly sensitive to these negotiations, making them a focal point for investors in the weeks ahead.

Outlook remains constructive but vulnerable to volatility

The S&P 500’s ability to hold above 6,586 remains critical for preserving near-term momentum. A decisive breakout above 6,670 could extend gains toward the 6,720–6,750 range, while a failure to hold support could trigger a pullback toward 6,512. Broadly, as long as the 6,400 zone remains intact, the index’s structural uptrend is expected to continue.

Previously, we noted that the index’s resilience was anchored by Fed support and breadth across technology and industrials. The latest rally reinforces this view, with liquidity and policy easing serving as the foundation, even as overbought signals warn of temporary consolidation.

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