The S&P 500 ($SPX) wrapped up Tuesday just below its intra-day midpoint and posted one of the narrowest ranges we’ve seen in the past two months. That’s a clear sign traders are reluctant to take major bets ahead of Wednesday’s 2:00 PM ET Federal Open Market Committee (FOMC) decision.
And honestly, this caution makes sense.
If we look back at how the stock market has reacted following the first two FOMC meetings of 2025, there has been a mix of hesitation and sharp moves. Below is an updated chart marking each FOMC date since 2024 alongside the S&P 500. After the late January meeting, the S&P 500 zig-zagged to marginal new highs over the next two weeks before the first of two sharp down legs unfolded.
FIGURE 1. FOMC DATES SINCE 2024.
Coincidence or not, the S&P 500 is trading at nearly the same price level now, six weeks later, as it was back then. So, how close are today’s prices compared to the close on March 18, the day before the last Fed meeting?
This close (see chart below):
FIGURE 2. THE S&P 500 IS TRADING VERY CLOSE TO LAST FOMC MEETING LEVELS.
The difference is that the index has been rallying for four weeks, starting from the pivot low on April 7, a month ago today. In March, the S&P 500 was trying to bounce after topping four weeks earlier on February 19. That bounce continued for a few more days before dominant down-trending price action took over.
But over the last few weeks, the dominant trend is definitely higher. So the big question now is: can this mini uptrend resume after this pause?
A Short-Term Setup to Watch
A few days ago, the 14-period relative strength index (RSI) on the two-hour chart grazed the 70-overbought level for the first time since late January (see chart below). Yes, it took a nearly 18% rally in a very short time frame for it to finally happen, but remember, the indicator was coming off its lowest level since the COVID lows. Modest 3–5% pops were enough to trigger overbought readings for much of 2024. Not this time.
As you know, overbought conditions never persist, especially in very short time frames like this. However, if this rally has anything left in the tank, we’ll see the indicator hit overbought again soon. That may not happen in the next day or two, but if the market reacts negatively to today’s news, but then a bid returns soon after, it could keep some of the bullish patterns we’ve been tracking in play. That’s just one scenario, but one we’ll be closely watching.
FIGURE 3. TWO-HOUR CHART OF THE S&P 500.
Bullish Patterns Still Intact
There are two bullish pattern breakouts still in play on the S&P 500 chart:
Inverse Head and ShouldersCup With Handle
And barring a very extreme and negative reaction, the patterns will stay alive today, as well.
FIGURE 4. INVERSE HEAD AND SHOULDERS AND CUP WITH HANDLE PATTERNS.
FIGURE 5. INVERSE HEAD AND SHOULDERS PATTERN IN THE S&P 500.
FIGURE 6. CUP WITH HANDLE PATTERN IN THE S&P 500.
A Bright Spot: Utilities
The Utilities Select Sector SPDR Fund (XLU) was the first sector ETF (and one of the first of all the ETFs we track) to notch a new 50-day high, which it hit on Tuesday. On the weekly chart, it’s clear the ETF is now trying to leverage a multi-month bottoming formation
This is especially notable because the formation has developed above two bullish pattern breakouts from 2024. Ironically, XLU’s first major breakout of 2024 happened around this time last year (late April), which set the stage for an extremely strong run, at least through late November.
The current snapback is important to watch, given how well XLU has recently capitalized on bullish breakouts. Some upside follow-through from here would also put the former highs back in the crosshairs.
FIGURE 7. WEEKLY CHART OF UTILITIES SELECT SECTOR SPDR (XLU).
Invesco Solar (TAN) Still Has Work to Do
Invesco Solar ETF (TAN) has been rallying since the April lows, much like nearly every ETF we track. On the daily chart, it’s been trying to leverage a bullish cup and handle pattern, a formation we’ve also seen emerge in many other areas. It’s coming off an extremely oversold condition, with its 14-week RSI undercutting 30 for just the third time since 2021. So, TAN could see some additional upside from here.
But the ETF will need to do much more to materially improve its long-term technical picture. Nearly every rally has stalled near the key weekly moving averages, all of which continue to slope lower. Selling strength in TAN has been a highly effective strategy since it peaked in early 2021.
FIGURE 8. WEEKLY CHART OF INVESCO SOLAR ETF (TAN).
Bitcoin Holding Up
Bitcoin has held its breakout from two weeks ago quite well so far. The next upside target remains near 103k. Again, regardless of whether or not you follow crypto, seeing the bid continue is a bullish sign for risk appetite across different asset classes, especially equities.
Fun fact: Bitcoin topped a few weeks before the SPX so it can be a useful leading indicator.
FIGURE 9. BITCOIN BREAKS OUT.
Ethereum Playing Catch-Up
While Ethereum’s extreme relative weakness vs. Bitcoin has continued, it too has rallied over the last few weeks. It’s now close to breaking out from a cup with handle formation. At the same time, it’s testing its now flat 50-day moving average.
The combination of a bullish breakout and a move through the 50-day moving average produced a very strong follow-through rally in November, something Ethereum will try to replicate.
FIGURE 10. ETHEREUM BREAKS ABOVE 50-DAY MOVING AVERAGE.
Final Thoughts
As we head into the Fed decision, we’re seeing a lot of cautious optimism in the charts. Key bullish patterns are still holding, sectors like Utilities are showing strength, and crypto is flashing green.
The next few sessions will be important. If we get a knee-jerk reaction to the Fed, but buyers step in quickly it could set the stage for the next leg higher in this rally.
Stay alert.
Frank Cappelleri is the founder and president of CappThesis, an independent technical analysis newsletter firm. Previously, Frank spent 25 years on Wall Street, working for Instinet, the equity arm of Nomura and Smith Barney. Frank’s various roles included being an equity sales trader, technical analyst, research sales specialist and desk strategist. Frank holds the CFA and CMT designations and is a CNBC contributor.
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