Selling S&P 500 with 7,370 in sight on rising likelihood of Fed’s hawkish policy

Following a nine-week rally, the S&P 500 Index (SPX) is now entering a local correction, consolidating near 7,540. The latest candle—with a small body and a short wick—suggests solid support at this level, but the broader picture points to a slowdown in the current uptrend.

Technical indicators confirm that bullish momentum is fading. The Average Directional Index (ADX) is declining from its 39 peak, hinting that the buying impulse is running on fumes. Meanwhile, +DI (16) keeps narrowing the gap with -DI (10), signaling that sellers are preparing to seize the initiative. The Stochastic Oscillator has already formed a bearish divergence, with the %K line crossing below the %D one, both of them looking down. However, the indicator remains in neutral territory, far from extreme levels but with plenty room to fall further.

The Accumulation/Distribution (A/D) indicator adds the final piece to this puzzle: the pullback coincides with a drop in prices, suggesting that major players have begun to lock in their positions. Although absolute readings remain high, the recent volume distribution could signal a deeper correction ahead.

The fundamental picture reinforces this bearish outlook. Despite a temporary agreement between Israel and Lebanon, the US-Iran peace talks regarding the Strait of Hormuz are far from over. Moreover, even if a long-awaited agreement is reached, restoring transit could take weeks. The likelihood of a rate hike by the Federal Reserve (Fed) at its December meeting has surged from 9% to 41% over the month. The June 10 Consumer Price Index (CPI) report climbs—which will reflect how the energy shock influenced inflation in May—could push this figure even higher. The market, which had previously ignored geopolitical risks, is entering a period where every new data release will serve as a reminder of the cost of that optimism.

Take a look at the following trading plan:

Sell SPX from 7,535. Place Take Profit at 7,370. Set Stop Loss at 7,660.

This forecast remains relevant between June 4 and June 11, 2026.