S&P500 (SPX) Price Analysis – Dec 29, 2023

Daily Price Outlook

On Thursday, the S&P 500 slightly increased, nearly reaching its record closing high from January 3, 2022. This minimal gain came despite early advances in the session, marking one of the final trading days of 2023. The Dow Jones Industrial Average saw modest growth, achieving a second consecutive record-high close, while the Nasdaq Composite ended slightly lower. All three indices are set for substantial gains on a monthly, quarterly, and annual basis.

Market strategist Ryan Detrick from Carson Group in Omaha commented on the remarkable end-of-year rally, attributing part of it to the Federal Reserve's policy shift in mid-December. He reflected on the journey from last year's bear market, emphasizing the market's resilience and potential for recovery.

Had the S&P 500 exceeded its previous all-time high, it would have marked the official entry into a bull market since its trough in October 2022. Detrick speculated that reaching new highs could indicate robust economic prospects for 2024.

Data released earlier, including jobless claims and pending home sales, depicted a softening yet sturdy economy. This data has reinforced market expectations of an impending rate cut by the Federal Reserve, potentially achieving a "soft landing" without a recession. Financial markets are currently pricing in a 74.1% probability of a 25 basis point rate cut by the Fed in March, as per the CME's FedWatch tool.

The Dow Jones Industrial Average rose 53.58 points (0.14%) to 37,710.1, while the S&P 500 gained 1.77 points (0.04%) to 4,783.35. The Nasdaq Composite slightly declined by 4.04 points (0.03%) to 15,095.14.

Utilities led gains in the S&P 500 sectors, while energy shares declined due to lower crude prices. U.S.-listed shares of Chinese firms like Alibaba and JD.Com saw increases, while CytoSorbents and Boeing faced setbacks.

The market's slight movements come amid global shares inching higher, influenced by rate cut expectations. The MSCI world equity index recorded a minor gain, while European shares hovered near a 23-month high, projecting an annual increase of about 12.5%.

Wells Fargo's Scott Wren cautioned that while the current rally might set record highs for the S&P 500, meaningful gains could be challenging in early 2024 as the economy slows. The unemployment data indicates a cooling labor market, aligning with predictions of swift rate cuts by the Fed.

Goldman Sachs analysts anticipate the Fed to initiate a series of rate cuts starting in March, continuing until the funds rate reaches 3.25-3.5% in 2025 Q3. This forecast includes five cuts in 2024 and three additional cuts in 2025.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.4%, mainly driven by Chinese stock gains, contributing to a 7.4% increase this quarter.

S&P500 (SPX): Technical Analysis

The S&P 500 Index (SPX) is currently demonstrating a stable performance, with a slight increase of 0.04%, trading at 4783 during the Asian session. This modest growth reflects the cautious sentiment prevailing in the market as investors navigate through varying economic signals.

Key price levels for the SPX include a pivot point at $4,794, indicating a critical juncture for potential market direction shifts. Resistance levels are set at $4,853, $4,915, and $4,981, each representing a hurdle that bulls must overcome to drive the index higher. Conversely, support levels at $4,694, $4,612, and $4,539 provide a safety net against bearish downturns.

The Relative Strength Index (RSI) stands at a high 73, suggesting the market is approaching overbought conditions. Such a high RSI often signals caution among traders, as it may indicate a potential pullback or consolidation in the near future. However, the SPX is comfortably trading above its 50-Day Exponential Moving Average (EMA) of $4,560, reinforcing a short-term bullish trend.

A notable chart pattern is the presence of a Doji candle under the 4795 level, which typically indicates indecision among investors and could weaken the upward trend. This pattern suggests that market participants are evaluating various factors, including economic data and global market trends, before committing to a clear directional move.

In conclusion, the current technical outlook for the S&P 500 is cautiously bearish below the $4795 level. Investors should closely monitor this pivot point and the aforementioned technical indicators, as they may provide valuable insights into the index's potential movements in the coming days.

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