Technical Analysis

S&P 500 Price Analysis – May 31, 2024

By LonghornFX Technical Analysis
May 31, 20243 min

Daily Price Outlook

During the European trading session, the S&P 500 index has been on the bearish track and remain under pressure around 5,235.48 level, hitting the intra-day low of 5,222.10 level. However, the bearish sentiment can be attributed to a combination of factors including weak economic data, dollar weakness, and geopolitical tensions. This downturn marks the largest two-week decline for the index since September 2022.

US Dollar Weakness and Economic Uncertainty Add Pressure

On the US front, the weakening of the US dollar and looming economic uncertainties have further exacerbated the downward pressure on the S&P 500 index. Despite initial optimism surrounding US economic recovery, the second estimate of first-quarter GDP growth revealed a downward revision, signaling slower-than-expected economic expansion. This slower growth trajectory, particularly driven by lower consumer spending, has raised concerns about the sustainability of the economic recovery and has dampened investor confidence.

On the data front, the second estimate of US GDP showed that the economy grew at an annualized rate of 1.3% in Q1. This was a drop from the previous reading of 1.6% but in line with market expectations. In the meantime, US weekly Initial Jobless Claims for the week ending May 25 increased slightly to 219K from 216K, which was slightly above the market consensus of 218K.

Moreover, market participants are closely monitoring inflationary pressures, with attention shifting to the personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge. The possibility of the Fed adjusting interest rates in response to inflation dynamics adds further uncertainty to the market outlook. The probabilities of interest rate cuts before September are currently hanging in the balance, reflecting market uncertainty regarding the Fed’s future policy actions.

Therefore, the weakening dollar, slower GDP growth, and uncertainty over Fed rate adjustments have intensified downward pressure on the S&P 500, dampening investor confidence.

Geopolitical Tensions Drive Volatility

On the geopolitical front, the long-lasting tension, particularly in the Middle East, have also contributed to heightened volatility in the S&P 500 index. Recent conflicts involving Israel and Gaza have raised concerns among investors, prompting a flight to safe-haven assets. However, the assertion of control over Gaza’s land border with Egypt by Israel has further escalated tensions in the region, potentially destabilizing geopolitical dynamics.

Therefore, the ongoing violence in Rafah, with reports of casualties and displacement, underscores the humanitarian crisis and adds to market jitters. UN experts are urging decisive international action, including sanctions and an arms embargo against Israel, highlighting the potential for further escalation and its implications for global stability.

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

S&P500 (SPX) - Technical Analysis

The S&P 500 is currently priced at $5235.47, down 0.06%, reflecting a minor decline in market sentiment. The pivot point for today’s session is at $5257.78.

Immediate resistance levels are identified at $5322.57, $5370.18, and $5419.82. On the downside, immediate support is found at $5200.92, followed by $5149.35 and $5103.06.

The 50-day Exponential Moving Average (EMA) is currently at $5208.72, indicating a potential support level close to the current price. The Relative Strength Index (RSI) stands at 41, suggesting that the market is in a bearish to neutral territory.

These indicators imply that the S&P 500 might face further selling pressure unless there is a shift in market dynamics.

For traders looking to navigate the current market conditions, an entry price is recommended below $5260, with a take profit target set at $5170.

A stop loss should be placed at $5324 to manage risk effectively. In conclusion, the S&P 500 is experiencing slight downward pressure, with technical indicators suggesting a cautious outlook.

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