Technical Analysis

S&P500 (SPX) Price Analysis – May 17, 2024

By LonghornFX Technical Analysis
May 17, 20244 min

Daily Price Outlook

During the European trading session, the S&P 500 index continued its bearish trend, experiencing a decline of 0.21%, falling by 11.05 points to reach a value of 5,297.10. The downward trend can be attributed to a combination of factors, including disappointing corporate performances from key companies like Deere & Co. and Martin Marietta Materials.

Furthermore, the cautious stance adopted by Fed officials overshadowed the anticipation of potential rate cuts, putting pressure on the S&P 500 index.

Impact of US Inflation Data on S&P 500 and Fed Policy Expectations

On the other side, the release of softer-than-expected US inflation data in April sparked anticipation of potential rate cuts by the US Federal Reserve, providing some support to the S&P 500. However, the subdued inflation figures were seen by market participants as a signal that the Fed might ease its monetary policy to stimulate economic growth.

This anticipation of reduced borrowing costs bolstered investor confidence and aided in limiting the S&P 500's losses.

Investors are closely monitoring statements from Fed officials, such as Atlanta Fed President Raphael Bostic and Cleveland Fed President Loretta Mester, who have commented on the recent inflation trends.

Despite signs of cooling inflation, policymakers remain cautious and prefer to examine additional data before making policy adjustments.

Therefore, the prospect of rate cuts, coupled with the Fed's cautious approach, has helped the market and limit its deeper losses.

Fed's Cautious Stance Fades S&P 500's Optimism

In contrast to this, the dovish stance adopted by Fed officials on Thursday, highlighting the need to keep borrowing costs high for longer, introduced uncertainty into the market sentiment.

Richmond Fed President Tom Barkin highlighted the importance of maintaining higher interest rates to ensure inflation remains on target, particularly noting price pressures in the services sector.

Investors are currently unsure about the future direction of the S&P 500 due to conflicting signals from Federal Reserve officials. Initially, there was optimism in the market as investors anticipated potential rate cuts by the Fed.

However, the cautious comments from Fed officials have dampened some of this optimism, leading investors to adopt a more cautious approach. As a result, investors are closely watching for upcoming economic data and Fed communications to gain clarity on the future trend of the S&P 500.

SPX Price Chart - Source: Tradingview
SPX Price Chart - Source: Tradingview

S&P500 (SPX) - Technical Analysis

The SPX is currently trading at $5,297.09, reflecting a 0.21% decline for the day. The 4-hour chart highlights a pivot point at $5,324.98, serving as a critical juncture for future price movements. Immediate resistance is found at $5,350.61, followed by $5,383.93 and $5,419.62.

On the downside, immediate support is at $5,263.46, with further support levels at $5,220.73 and $5,180.58. These support levels are vital for maintaining the current trend, as a break below these points could signal a shift towards a bearish outlook.

The 50-day Exponential Moving Average (EMA) at $5,119.01 provides additional support, indicating a longer-term bullish trend despite the current pullback.

The Relative Strength Index (RSI) is currently at 74, suggesting that the SPX is in overbought territory. An RSI above 70 typically indicates that the asset is overbought and could be due for a corrective pullback.

The recent price movement in the SPX shows a potential correction phase, with the index retreating from the highs near the immediate resistance levels. The ability of the SPX to stay above the pivot point of $5,324.98 is crucial for maintaining a bullish outlook.

In conclusion, the technical outlook for the SPX remains cautiously bearish below the pivot point of $5,324.98. An entry price for selling is recommended below this level, with a take profit target at $5,262 and a stop loss at $5,350.

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