The broader US stock indices are making a break to the upside, and the catalyst is more dovish commentary from Fed Governor Christopher Waller.

Waller sees signs that inflation pressures are easing, although he still wants to see next week's PPI and CPI reports ahead of the September 16 Fed rate decision. His comments have helped push US yields lower and stocks higher. Waller is a permanent voting member of the Federal Open Market Committee, so his remarks are closely watched for signals about the direction of rate policy.

Why does that matter? Lower yields can reduce borrowing costs and make stocks more attractive relative to bonds. They can also increase the value investors place on companies' future earnings, which is particularly relevant for growth and technology stocks. That relationship does not hold every time, but today the markets are following the familiar pattern.

The gains have been led by the broader indices:

• S&P 500: Up around 0.47%.
• Nasdaq Composite: Up around 0.70%.

The news provides the catalyst, while the price action and technical tools help traders decide what to do with it. The next scheduled markers are the PPI and CPI releases, followed by the Fed's September 16 decision, each capable of resetting both yields and the technical picture.

Moving averages are useful because they provide a reference point for both directional bias and risk. Above a key moving average, the bias is more bullish. Below it, the bias becomes more bearish. When the price trades between two important moving averages, the technical picture is more neutral.

Put another way, the moving average does not guarantee the next move. It gives traders a level against which to judge whether their trading idea is working—and where to reconsider it if the price moves the other way.

S&P 500: Today's rally has taken the price above its 100-hour moving average at 7695 (blue line on the chart). With the 200-hour moving average (green line) below that level at 7654, the index is now above both moving averages, giving buyers more control. The 7695 level becomes the first reference point for risk. Stay above it, and the bullish break remains intact. Move back below it, and the bias shifts toward neutral between the two moving averages. A break below 7654 would weaken the technical picture further.

Nasdaq Composite: The price has also broken above its 100-hour moving average (blue line) at 26,301. Today's high reached approximately 26,475, with the current price near 26,400. The 26,301 level now gives buyers a nearby reference point for risk. Holding above it keeps the bullish bias intact, with today's high the first upside reference to revisit and get through. A move back below the 100-hour moving average would weaken the breakout and shift the bias toward neutral between the 100- and 200-hour moving averages.

The lesson is simple: use the news to understand the catalyst, and use the technical levels to define risk. Buyers have made their move; now they need to hold above the levels they have broken.

In the accompanying video, the author walks through both indices and explains how to use these moving averages to identify the bias, define risk, and map out the next targets. The goal is a simple, repeatable process for more disciplined trading decisions.

Source: ForexLive / InvestingLive