S&P500 (SPX) Price Analysis – Feb 23, 2024

Daily Price Outlook

The global market sentiment has been on the bullish track and still flashing green on the day. This can be witnessed by the bullish performance of S&P 500 index, which tracks the performance of 500 large-cap U.S. stocks. It maintained its previous upward trend and surged to new highs on Friday, driven by strong earnings from chip giant Nvidia. However, the index gained 2.11% to close at 5,087.03, marking its best day since January 2023.

On the fundamental side, the upward momentum in the S&P 500 index was mainly backed by the Federal Reserve's hawkish outlook as the hawkish Fed signals confidence in economic strength, reassuring investors. Meanwhile, geopolitical tensions highlight the potential risks to the market. Investors will continue to monitor economic data and geopolitical developments for clues about the future direction of the market.

Federal Reserve's Hawkish Outlook and U.S. Economic Data

On the US front, the Federal Reserve's hawkish outlook and recent U.S. economic data have been closely watched by investors. It should be noted that the minutes from the latest FOMC meeting indicated uncertainty about the duration of current interest rates to combat inflation. Fed Vice Chair Philip Jefferson suggested a possible rate cut later in the year.

Meanwhile, Philadelphia Federal Reserve President Harker believes there is a possibility of rate cuts later on but is cautious about implementing them too soon due to concerns about inflation. At the same time, Federal Reserve Governor Cook thinks it is premature to lower rates because there is uncertainty about inflation trends. On the other hand, Governor Waller advises waiting to see how inflation progresses.

Therefore, the S&P 500 is rising in response to the hawkish outlook from the Federal Reserve, likely because investors perceive this stance as a sign of confidence in the economy's strength and prospects. This confidence could be bolstering equities as investors anticipate continued economic growth despite potential interest rate increases to combat inflation.

Geopolitical Issues and Their Impact on the S&P 500

On the geopolitical front, the ongoing conflict between Israel and Gaza has added to market uncertainty. Israeli airstrikes on Gaza's Rafah and attacks by Yemen's Houthis on ships in the Red Sea have raised fears of a wider conflict in the Middle East. Meanwhile, the humanitarian crisis in Gaza, with reports of civilian casualties and damage to infrastructure, has prompted calls for intervention from the international community. The United Nations Relief and Works Agency (UNRWA) has stated that it is at a "breaking point" due to the freezing of funds by Western donors, exacerbating an already dire humanitarian situation.

Therefore, the long-lasting geopolitical tensions, particularly in the Middle East, increase market uncertainty, leading to a cautious approach among investors and impacting the S&P 500's performance.

S&P500 (SPX) - Technical Analysis

The S&P 500 index demonstrated robust performance on February 23, with a noteworthy surge of 2.11%, closing at 5087.02. This uptrend highlights the market's buoyant risk appetite and is potentially reflective of favorable corporate earnings or economic data surpassing investor expectations.

The index's pivot point stands at 4989.23, a critical juncture that demarcates the transition between bullish and bearish domains. As the index pushes forward, it faces immediate resistance at 5061.11, with further hurdles at 5122.34 and 5191.56. These levels are key markers that could either cap the rally or, if surpassed, may signal a stronger bullish momentum. On the descent, immediate support lies at 4933.33, followed by subsequent support levels at 4864.11 and 4805.54, which are crucial for maintaining the current uptrend.

The Relative Strength Index (RSI) stands at 67, edging closer to overbought territory but still indicative of a strong bullish sentiment within the market. The Moving Average Convergence Divergence (MACD) reading of 2.29000 significantly below the signal line of 26.66 may suggest that despite recent gains, caution is warranted as momentum could be waning.

The current technical outlook for the S&P 500 is predominantly bullish, but with an undercurrent of caution as indicated by the MACD. Investors may consider a buy limit order at 5076, with an objective to take profits at 5127, and a stop loss at 5045, crafting a strategy that seeks to capitalize on the prevailing upward trend while safeguarding against a potential reversal.