S&P500 (SPX) Price Analysis – July 26, 2024

Daily Price Outlook

The global market sentiment has lost momentum, with the S&P 500 index trading around 5,399.22 and hitting an intra-day low of 5,390.95. This decline stems from disappointing earnings reports from major tech companies like Alphabet and Tesla, which triggered widespread market sell-offs.

Meanwhile, the weak U.S. manufacturing data and lower-than-expected new home sales have heightened investor concerns, heightening the market's negative reaction.

Besides this, the economic slowdown in China, highlighted by disappointing GDP growth and an unexpected rate cut by the People's Bank of China (PBoC), has further pressured U.S. stocks as reduced business investment and consumer spending in China have added to market uncertainties.

Investor caution has also been influenced by upcoming U.S. core PCE data, contributing to increased volatility.

China's Economic Slowdown and Its Impact on the S&P 500 Index

On the China front, the Third Plenum's lackluster outcome, weaker-than-expected Q2 GDP growth, and an unexpected rate cut by the People’s Bank of China (PBoC) have signaled a slowdown in the world's second-largest economy, raising concerns about business investment and consumer spending.

Meanwhile, the PBoC cut its one-year policy loan rate by 20 basis points to 2.3%, the largest reduction since April 2020, after also lowering a key short-term rate. This move aims to support the slowing economy, with silver, a metal used in industries like renewable energy and electric vehicles, potentially being impacted by these economic shifts.

These developments in China have weighed heavily on the S&P 500 index, amplifying investor concerns about global economic stability.

The slowdown in China's economy and reduced business investment and consumer spending have increased market uncertainty, contributing to the index's recent declines and overall market volatility.

Impact of Core PCE Data and Fed Rate Cut Expectations on the S&P 500 Index

On the US front, Investor uncertainty has impacted the S&P 500 index as they await the core Personal Consumption Expenditure (PCE) price index data for May. The PCE, a crucial inflation gauge for the Federal Reserve, is projected to show a year-on-year decrease to 2.5% from 2.8%, with a monthly growth rate of 0.1%.

This data will influence expectations for potential Fed rate cuts, which are anticipated to begin in September.

Despite the US dollar facing challenges due to these rate-cut expectations, strong economic indicators, such as 2.8% GDP growth and lower unemployment claims, have mitigated market losses. However, lower inflation continues to pose a challenge to the dollar's strength.

Therefore, investor uncertainty ahead of the core PCE price index data for May has impacted the S&P 500 index. Meanwhile, the expectations of a Fed rate cut in September, combined with strong economic data, have limited market losses despite ongoing inflation concerns.

S&P 500 - Technical Analysis

The S&P 500 (SPX) is currently trading at $5399.23, marking a decline of 0.51%. The 4-hour chart highlights critical levels and indicators that shape the current market sentiment and potential future movements. The pivot point is set at $5429.65, serving as a key reference for traders.

On the upside, immediate resistance is noted at $5502.69, followed by $5577.16 and $5665.95. These resistance levels will be crucial for any bullish attempts to recover recent losses.

Conversely, immediate support is found at $5327.98, with further support levels at $5259.24 and $5190.50, which could be pivotal for any further downward pressure.

The Relative Strength Index (RSI) is currently at 33, indicating that the S&P 500 is approaching oversold territory. This suggests the possibility of a short-term rebound or consolidation before any significant directional move.

The 50-day Exponential Moving Average (EMA) is positioned at $5529.94, indicating that the current price is below this average, reinforcing a bearish sentiment. The 50 EMA often serves as a benchmark for medium-term trends and could act as a resistance level if the price attempts to rise.

In conclusion, the technical outlook for the S&P 500 remains bearish below the $5429.65 pivot point. Traders are advised to consider entry points for selling below $5430, with a take profit target of $5325 and a stop loss at $5500.

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