S&P500 (SPX) Price Analysis – Aug 23, 2023

Daily Price Outlook

The global market sentiment has prolonged its upward trend and improved on Wednesday as concerns about US-China relations combined with anticipation for the preliminary August Purchasing Managers Indexes (PMIs) for major economies. As in result, the S&P 500 Futures showed a 0.20% intraday increase, recovering from the previous day's decline. Furthermore, the US 10-year Treasury bond yields decreased by two basis points to 4.31%, following a reversal from the previous day's peak, which was the highest since 2007.

Positive Steps in US-China Relations: Commerce Secretary's Meeting and Sanctions Removal

The US Commerce Department mentioned a positive development on Tuesday. Commerce Secretary Gina Raimondo is set to meet with the Chinese Ambassador and Vice Foreign Minister, Xie Feng, next week. They had a productive discussion before Raimondo's trip to China. This week, the US Commerce Department's Bureau of Industry and Security (BIS) took 27 Chinese entities off its Unverified List. This action removed sanctions from those entities and raised hopes for better US-China relations.

The positive development of Commerce Secretary Gina Raimondo's upcoming meeting with Chinese officials, coupled with the removal of 27 Chinese entities from the Unverified List by the BIS, has generated optimism in the market. This suggests potential improvement in US-China relations, boosting investor sentiment and fostering hopes for enhanced economic cooperation.

Market Sentiment and Economic Factors Influencing Trading

On the flip side, the ongoing concerns about China's economic recovery and a stronger US Dollar are tempering market optimism, especially ahead of upcoming data releases. Despite this, the US Dollar Index (DXY) has pulled back from its recent 10-week high of around 103.50. This retreat follows positive reports on US Existing Home Sales in July and the Richmond Fed Manufacturing Index for August, along with higher Treasury bond yields.

The Existing Home Sales showed a 2.2% decrease compared to the previous month's 3.3% drop. The Richmond Fed Manufacturing Index matched the market forecast of -7.0, slightly better than the previous -9.0. Federal Reserve Bank of Richmond President Thomas Barkin emphasized achieving the 2.0% inflation target and downplayed US recession concerns by suggesting any potential recession would likely be less severe.

He also noted the Fed should consider the possibility of the economy picking up pace, affecting the central bank's inflation strategy. This stance is boosting the risk-on sentiment.

Global Economic Updates and Key Events for Traders

Australia and New Zealand had disappointing PMIs and retail sales, while Japan's PMIs improved, boosting the Yen. Traders are watching US PMIs and Existing Home Sales. S&P Global Manufacturing PMI might rise, but Services could dip slightly. The Australian Dollar might be influenced. The Jackson Hole Symposium on Friday is also important for guidance.

S&P500 (SPX) - Technical Analysis

Analyzing the technical landscape of the S&P 500 reveals an interesting scenario. Despite minor fluctuations reminiscent of a drizzle, my attention has been directed towards the 4400 level. A closer examination unveils the 50-day exponential moving average acting as a robust support pillar at 4385.

The noteworthy development is the confirmation triggered by candle closures above this threshold, signaling a bullish inclination. Delving into the technical indicators, both the relative strength index and the moving average convergence divergence indicators exhibit a steady stance, lending weight to the potential for a sustained upward trajectory.

Moreover, a compelling possibility emerges as the S&P 500 demonstrates the capacity to aim for the 4420 level. Should this objective be realized, the subsequent milestone at 4450 looms on the horizon. Conversely, a breach below 4385 could steer the index towards the 4360 or 4336 vicinity. As prudent strategy dictates, maintaining a vigilant stance to seize a buying opportunity around the 4385 level is recommended for the day.