S&P500 (SPX) Price Analysis – Aug 23, 2024
Daily Price Outlook
The global market sentiment has shown a bearish trend, as evidenced by the performance of the S&P 500 index. The S&P 500 fell 0.9% to around 5,570.64, hitting an intra-day low of 5,560.95. The index is attempting to limit its losses, with attention turning to an address by Federal Reserve Chair Jerome Powell for more cues on the bank’s plan to cut interest rates.
The S&P 500's decline is driven by concerns over a potential recession due to a cooling labor market and anticipated Fed rate cuts, which have raised fears of slower economic growth impacting corporate earnings. Additionally, ongoing geopolitical tensions, notably the conflict between Israel and Gaza, have further pressured the S&P 500 index.
S&P 500 Faces Pressure from Recession Concerns and Fed Rate Cut Uncertainty
On the US front, the S&P 500 index is facing pressure amid growing expectations that the Federal Reserve may start lowering interest rates at its September meeting. Recent US economic data, including rising Initial Jobless Claims and a downward revision in job numbers, has increased concerns about a potential recession.
The S&P Global PMI indicated a sharp contraction in manufacturing, while the services sector showed unexpected growth, adding to market uncertainty.
Fed Chair Powell’s upcoming speech at the Jackson Hole Symposium is expected to provide more clues about potential rate cuts. Markets are already pricing in a rate reduction, which, combined with recent signs of a cooling economy, is raising fears of a slowdown.
This environment has put additional pressure on the S&P 500, as investors worry about the broader economic impact and potential for lower corporate earnings.
Therefore, the S&P 500 is under pressure due to growing concerns about a potential recession and uncertainty from upcoming Fed rate cuts. Rising jobless claims, a revised downward jobs report, and mixed economic indicators heighten fears of economic slowdown and lower corporate earnings.
Geopolitical Tensions Between Israel and Gaza Impact S&P 500 Index
On the geopolitical front, ongoing tensions between Israel and Gaza are causing significant uncertainty. Recent developments, such as ceasefire talks and intensified conflict resulting in over 40,000 deaths in Gaza, have heightened global risk aversion.
These geopolitical tensions are negatively impacting the S&P 500 index. As investors respond to the increased risk and instability, they may reduce their exposure to equities.
This cautious sentiment and the broader market uncertainty contribute to the downward pressure on the S&P 500, exacerbating existing concerns about economic conditions.
S&P 500 - Technical Analysis
The S&P 500 is currently trading at $5,570.65, reflecting a decline of 0.89% on the day. The index has been under pressure, struggling to maintain momentum above the key pivot point at $5,584.24.
The recent pullback suggests that the bulls are losing steam, and the market may be preparing for a further downward correction. Immediate resistance is noted at $5,699.82, followed by $5,754.94, levels that need to be breached for the index to resume its upward trajectory.
On the downside, the first line of defense for the bulls lies at $5,515.94, with stronger support at $5,441.61 and $5,381.03, which could come into play if selling pressure intensifies.
Technical indicators are painting a cautious picture. The Relative Strength Index (RSI) is edging lower, signaling that the market may be entering oversold territory, which could spark a near-term bounce.
However, the 50-day Exponential Moving Average (EMA) at $5,449.29 is crucial, as it has acted as a significant support level in recent weeks. A close below this EMA could accelerate the downward momentum, pushing the index toward the lower support levels mentioned.
Given the current setup, the S&P 500 appears vulnerable to further declines unless it can reclaim the pivot point at $5,584.24 and move decisively higher.
Traders should monitor the $5,515.94 support closely, as a break below this could open the door to a deeper correction. Conversely, if the index manages to stay above $5,515.94, we might see a consolidation phase before any significant move.
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