S&P500 (SPX) Price Analysis – Aug 16, 2024
Daily Price Outlook
During the European trading session, the S&P 500 index has experienced a robust upward trend recently, driven by renewed investor confidence in the U.S. economy.
On Thursday, the index climbed 1.61% to close at 5,543.22, marking its sixth consecutive gain. This rally has pushed the index up by approximately 8% from its intraday low on August 5.
However, the primary reason behind this surge has been stronger-than-expected consumer and labor data.
July's retail sales increased by 1%, far exceeding expectations of a 0.3% rise, while weekly jobless claims fell, indicating a resilient labor market.
These encouraging figures have alleviated recession fears and bolstered market sentiment, contributing to the S&P 500's impressive performance.
Strong Economic Data and Fed Rate Cut Expectations Propel S&P 500 Higher
On the US front, the Federal Reserve's anticipated rate cuts and the subsequent weakening of the US dollar have significantly contributed to the S&P 500's upward momentum.
With inflation pressures easing, the market is now fully expecting a 25 basis point rate cut at the Fed's September meeting.
This has driven a slight decline in US Treasury yields, softening the dollar's recent strength. Additionally, robust economic indicators, such as stronger-than-expected retail sales and a resilient labor market, have bolstered investor confidence.
On the data front, US Retail Sales rose by 1.0% month-over-month in July, rebounding sharply from June's 0.2% decline and surpassing the 0.3% forecast.
Initial Jobless Claims for the week ending August 9 dropped to 227,000, better than the expected 235,000 and lower than the previous week's 234,000.
Meanwhile, the US headline Consumer Price Index (CPI) increased by 2.9% year-over-year in July, down from June’s 3% rise and below expectations.
The Core CPI, excluding food and energy, rose by 3.2% year-over-year, slightly down from 3.3% in June but in line with forecasts.
Therefore, the stronger-than-expected retail sales and resilient job market boosted investor confidence, while easing inflation pressures supported expectations of Fed rate cuts, driving the S&P 500 index higher
Geopolitical Tensions Exert Downward Pressure on S&P 500
On the geopolitical front, the increasing tensions, particularly in the Middle East and the ongoing Russia-Ukraine conflict, have capped gains in the S&P 500.
Recent events, such as the assassination of a Hamas leader and the ongoing violence in Gaza and the West Bank, have heightened market anxieties.
Hence, the heightened geopolitical tensions, including Middle East violence and the Russia-Ukraine conflict, have increased market anxiety, leading investors to seek safer assets, thereby exerting downward pressure on the S&P 500.
S&P 500 - Technical Analysis
The S&P 500 is showing strong upward momentum, currently trading at $5,543.21, up 1.61% for the day.
This surge positions the index above its pivot point at $5,512, suggesting that the bulls are firmly in control.
The next immediate resistance is seen at $5,586, and a break above this level could push the index toward $5,666, with a further target at $5,763.
However, traders should be cautious as the RSI is approaching overbought territory, currently sitting at 64.
The 50-day Exponential Moving Average (EMA) at $5,454 provides a solid support base, reinforcing the current bullish trend.
Immediate support lies at $5,441, with additional safety nets at $5,343 and $5,234. These levels are crucial for maintaining the upward momentum.
If the price dips below $5,441, we might see a short-term correction, but as long as it stays above the $5,454 EMA, the outlook remains positive.
For those looking to enter the market, buying above $5,510 could be a strategic move, targeting a take-profit at $5,644.
A stop-loss should be placed at $5,440 to manage downside risk. The key to watch will be how the index reacts around the $5,586 resistance level, which could determine the sustainability of this bullish run.
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