S&P500 (SPX) Price Analysis – Aug 02, 2024
Daily Price Outlook
S&P 500 (SPX) failed to stop its downward trend and remains under pressure around the 5,446 level, hitting an intraday low of 5,410. This decline is driven by economic uncertainties, dovish Federal Reserve policies, and escalating geopolitical tensions.
Looking ahead, traders are awaiting upcoming US labor market data, including Nonfarm Payrolls (NFP) and Average Hourly Earnings for July.
The official employment data will indicate the current status of the labor market, which will influence market speculation for a potential US Federal Reserve (Fed) rate cut in September.
The US NFP report is expected to show that 175K new jobs were added in July, a decrease from the previous addition of 206K. The Unemployment Rate is expected to remain steady at 4.1%.
US Economic Data and Fed Speculation Intensify S&P 500 Pressure
On the US front, speculation about potential Federal Reserve rate cuts in September has increased pressure on the S&P 500. Recent manufacturing and employment data have heightened concerns about the economy. The ISM Manufacturing PMI dropped to an eight-month low of 46.8 in July, down from 48.5 and falling short of the expected 48.8.
Additionally, US Initial Jobless Claims rose to 249K for the week ending July 26, surpassing both the forecast of 236K and the previous week's 235K.
These data points have heightened risk aversion among investors and affected the S&P 500's performance. The Fed's decision to keep rates unchanged at 5.25%-5.50% in July, along with indications of potential rate cuts due to cooling inflation and a moderating labor market, has contributed to market uncertainty.
If the upcoming Nonfarm Payrolls (NFP) report reveals a lower job addition of 175K for July, compared to the previous 206K, and if the Unemployment Rate holds steady at 4.1%, it could impact the Fed's future rate cut decisions.
Investors will also be closely monitoring the Average Hourly Earnings data, which is expected to show annual wage growth slowing to 3.7% from 3.9%, with a monthly increase of 0.3%. Softer wage growth could reinforce expectations for a Federal Reserve rate cut, while stronger numbers might diminish those prospects.
Middle East Tensions Heighten Instability and Impact S&P 500
On the geopolitical front, tensions in the Middle East have further impacted market sentiment. The assassination of Hamas leader Ismail Haniyeh in Tehran has intensified regional instability. According to The New York Times, Haniyeh was killed after attending the new president's inauguration, with accusations from both Iranian officials and Hamas pointing to Israel.
This escalation has contributed to a risk-off sentiment in global markets, affecting the S&P 500.
S&P 500 - Technical Analysis
The S&P 500 (SPX) index is currently trading at $5,446.69, down 1.37% as investor sentiment shifts amid economic uncertainties and corporate earnings reports. The 4-hour chart reveals that the index is trading below the pivot point of $5,412.99, indicating potential further downside unless key support levels hold.
Immediate support is found at $5,327.98, with subsequent levels at $5,259.24 and $5,190.50. If the index breaches these supports, it may face additional downward pressure.
The immediate resistance stands at $5,502.69, followed by $5,577.16 and $5,665.95. To regain upward momentum, the S&P 500 needs to break through these resistance levels decisively.
The Relative Strength Index (RSI) is currently at 44, indicating that the index is approaching oversold territory. This suggests that while there is bearish sentiment, there might be potential for a rebound if positive economic data or earnings surprises materialize.
The 50-day Exponential Moving Average (EMA) is positioned at $5,530.15, further highlighting the need for a break above immediate resistance to shift the short-term outlook to bullish.
In terms of strategy, buying is recommended above $5,415, with a take-profit target set at $5,500 and a stop-loss at $5,350. This approach allows traders to capitalize on potential rebounds while managing downside risks.
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