Technical Analysis

S&P500 (SPX) Price Analysis – May 19, 2023

By LonghornFX Technical Analysis
May 19, 20234 min

Daily Price Outlook

U.S. stocks continued their upward trajectory for a second consecutive day on Thursday, fueled by optimism surrounding a potential resolution to the country's debt issue.

Additionally, positive sales forecasts from retail giant Walmart Inc. (WMT.N) provided an additional boost to market sentiment. As investors awaited news on the debt ceiling negotiations, the S&P 500 index (.SPX) managed to recover from early losses, buoyed by remarks from Kevin McCarthy, the leading U.S. congressional Republican, who expressed optimism about reaching an agreement.

Amidst these developments, President Joe Biden and McCarthy scheduled discussions to expedite the process of raising the national debt. The market remained attentive to these crucial negotiations, as they would have far-reaching implications for the economy and interest rate policies.

U.S. stocks displayed resilience on Thursday, as hopes for a swift resolution to the country's debt issue fueled positive market sentiment. Walmart Inc. (WMT.N) provided further support, with an upbeat sales forecast for the year. Kevin McCarthy, the prominent U.S. congressional Republican, offered a glimmer of hope by suggesting the possibility of an agreement to raise or suspend the debt ceiling, potentially leading to a House vote next week.

Consequently, the S&P 500 index (.SPX) managed to recover from early losses. President Joe Biden and McCarthy, aiming for a quick resolution, agreed to engage in discussions as early as Sunday to address the pressing matter of raising the national debt, which currently stands at $31.4 trillion.

Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan, highlighted the easing of stress surrounding the debt ceiling, while acknowledging McCarthy's optimism for a deal by the end of the week.

Amidst these positive developments, Walmart's (WMT.N) shares climbed 1.30% to $151.47 following better-than-expected first-quarter earnings and an upward revision to their 2023 sales and profit outlook.

However, concerns over the debt ceiling continued to cast uncertainty over Federal Reserve interest rate policies. Nevertheless, economic data revealed fewer-than-anticipated filings for unemployment benefits, reflecting a tight labor market and potentially allowing the Fed to maintain its course of rate hikes.

While the U.S. economy has shown signs of some slowdown due to inflation-fighting rate increases, Fed officials remain cautious about cutting rates or deviating from the current trend of hikes. Dallas Federal Reserve Bank President Lorie Logan and Fed Governor Philip Jefferson emphasized that the economy does not appear to be decelerating rapidly enough to warrant a pause in rate hikes.

Saglimbene cautioned that the upcoming debt ceiling agreement if reached, coupled with the June Fed meeting, which policymakers have hinted could be live, may cap market momentum.

Notably, the Nasdaq Composite experienced 88 new highs and 83 new lows, while the S&P 500 established 27 new 52-week highs and encountered seven fresh lows, underscoring the ongoing market fluctuations.

 SPX Price Chart - Source: Tradingview

SPX S&P500 – Technical Outlook

The S&P 500 is currently trading at the 4198 level, aligning closely with our previous forecast of 4190. On the four-hour timeframe, the index has broken through an ascending triangle pattern, indicating a strong resistance level around 4160.

This violation of the pattern suggests a potential continuation of the bullish trend, with further upward movement expected in the S&P 500.

A bullish engulfing candle has formed on the four-hour chart, signaling a potential buying opportunity. The next significant resistance level to watch is at 4222, while support is seen around 4180. It is advisable to wait for a pullback to the 4182 level before considering additional positions on the S&P 500.

Both the RSI and MACD indicators are currently in neutral territory, and the 50-day exponential moving average is providing additional support.


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