S&P500 (SPX) Price Analysis – May 30, 2023

Daily Price Outlook

The global market sentiment continued its upward rally on Tuesday, maintaining a positive outlook. Investors reacted with optimism to the recent agreement in the US that aims to prevent a potential default.

This positive sentiment is bolstered by robust economic data from the US, indicating strength in the world’s largest economy. Despite worries about the impact of rising inflation on purchasing power, there is a hopeful outlook that the economy can avoid a recession.

The S&P 500 Futures, which indicate market expectations, show modest gains around 4,220, following a retreat from the yearly high seen the previous day.

Similarly, the yield on the US 10-year Treasury bond has dropped by five basis points (bps) to 3.76%, while the two-year yield has reversed from an 11-week high and is showing its first daily loss since May 11, currently standing around 4.58%.

Markets in the US, Germany, Switzerland, and the UK were closed the previous day, so traders couldn’t react to the news of the US policymakers reaching an agreement to extend the debt ceiling until January 2025.

However, this sets the stage for a positive start to the trading week, as traders are hopeful that the agreement will prevent a potential US debt default. They are optimistic about the situation and expect a good week of trading ahead.

Debt Ceiling Agreement Reached, but Opposition Looms in Congress

US President Joe Biden and top Republican Kevin McCarthy have reached a preliminary agreement to raise the US government’s debt ceiling until January 2025. President Biden is urging Congress to pass the deal, and McCarthy is confident it will be approved in the House.

Conversely, some Republican policymakers are opposing the compromises made in the debt ceiling agreement and are prepared to challenge it in both the House and the Senate. This has created uncertainty in the market and has led to the US Dollar maintaining its strength.

Economic Worries in Eurozone and US-China Tensions Dampen Market Sentiment

Furthermore, the ongoing concerns about a possible recession in the Eurozone have emerged due to a downward revision of Germany’s Q1 GDP figures. This and ongoing tensions between the US and China dampen market sentiment. Additionally, China has declined a request from the US for a meeting of Defense Chiefs in Singapore, as the Wall Street Journal reported.

Therefore, the downward revision of Germany’s Q1 GDP figures raises worries about the region’s overall economic health. Moreover, ongoing tensions between the US and China add to the uncertainty and contribute to a cautious market outlook. China’s rejection of the US request for a Defense Chiefs meeting further exacerbates the geopolitical tensions.

Hence, these factors create an environment of increased risk and uncertainty, potentially affecting investment decisions and market performance.

Upcoming Key Events to Watch: Eurozone and US Sentiment, US Default News, and US Jobs Report

It is important to keep an eye on sentiment numbers from the Eurozone and the US. These numbers will provide valuable information, especially in light of the recent increase in expectations of the Federal Reserve adopting a more hawkish stance.

Additionally, monitoring the market’s reaction to the latest news regarding the US default is crucial. Furthermore, the US jobs report on Friday will be a key event to pay attention.

SPX S&P500 – Technical Outlook

The S&P 500 is currently experiencing some volatility as we enter the middle of the trading week. Today, the focus will be on the release of consumer confidence data from the US economy, which is expected to have an impact on the price action of the S&P 500.

Currently, the index is trading around the 4205 level and facing resistance around 4210. This level has now formed a double top pattern, indicating a potential reversal. The formation of bearish candlesticks below the 50-day exponential moving average further supports the possibility of a bearish continuation.

However, before we see a potential bearish continuation, there is a possibility of a minor correction in the S&P 500, with support expected around the 4175 level or even down to 4150. Today, it is important to monitor the 4215 level as it is likely to act as a pivot point.

Below this level, we can expect a bearish sentiment, while above it, a bullish sentiment may prevail. A break above the 4215 level could expose the S&P 500 to higher levels such as 4250 or even 4299. On the downside, key support levels are likely to be found around 4150 and 4103.

Let’s keep a close eye on these levels and observe the price action of the S&P 500 throughout the day.