Technical Analysis

S&P500 (SPX) Price Analysis – Nov 03, 2023

By LonghornFX Technical Analysis
Nov 3, 20234 min

Daily Price Outlook

The global market sentiment has continued to rise and remained strong throughout the day. This can be witnessed by the fact that the wall Street experienced a significant rally on Friday, largely driven by investor optimism about a potential resolution to the Federal Reserve's interest rate hikes. Notably, the S&P 500 index surged by 1.8%, marking a 4.8% increase for the week. Therefore, thiis performance represents its strongest weekly showing in nearly a year.

In the meantime, Dow Jones Industrial Average and Nasdaq Composite also posted significant gains. However, this positive momentum was driven by the Federal Reserve's decision to maintain interest rates at their current levels, along with Chair Jerome Powell's comments suggesting a pause in rate hikes. Notably, the CME Group's FedWatch tool indicated an 83% probability that the Fed would indeed keep rates unchanged in December.

Positive Economic Data and Its Impact on Market Sentiment

It is important to note that the current ongoing rally was influenced by the recent positive economic data. Non-farm productivity growth in the third quarter reached a peak of 4.7%, marking the best performance since 2020. However, this uptick is attributed to a 5.9% increase in output and a 1.1% rise in hours worked. The surge in productivity has contributed to reducing unit labor costs, a key indicator for core inflation trends.

As a result, the Federal Reserve is likely to be reassured by this third-quarter decline and may choose to stay on the sidelines, maintaining current policies. The upcoming payrolls report is crucial because an extreme result could affect market sentiment, potentially causing concerns about a recession.

Economists anticipate about 180,000 new jobs, but data indicates a more robust job market with around 200,000 new jobs. Therefore, the focus should be on the Federal Reserve's reaction, and it's improbable they will alter their current position unless there's a substantial surge in inflation or a significant economic downturn. This represents a change in the Fed's impact on the market, which marks a departure from the past.

Therefore, this positive economic news is expected to strengthen the S&P 500 index, supporting its upward trajectory by signaling potential stability in interest rates and core inflation, which, in turn, bolsters investor confidence.

S&P500 (SPX) Price Chart – Source: Tradingview
S&P500 (SPX) Price Chart – Source: Tradingview

S&P500 (SPX) - Technical Analysis

The S&P 500 index has exhibited a bullish momentum in recent trading sessions, closing at 4317.79, marking a 1.89% increase over the past 24 hours. The index has been hovering around the pivot point of $4,218, with immediate resistance at $4,317. If this upward trend continues, the next resistance levels to watch are $4,373 and $4,427. On the flip side, should a reversal occur, immediate support lies at $4,062, with subsequent levels at $4,005 and $3,907.

From a technical perspective, the Relative Strength Index (RSI) stands at 63, which indicates a slightly bullish sentiment without venturing into overbought territory. This suggests that there might be more room for the index to climb before encountering significant selling pressure.

The 50-Day Exponential Moving Average (EMA) also points to bullish signals, with the current value at $4,269. The index trading above its 50 EMA is indicative of a short-term bullish trend, reinforcing the current upward trajectory.

Chart patterns further fortify the bullish sentiment, with a discernible upward channel forming over the past several weeks. This pattern, coupled with consistent bullish candlesticks, signals that the index is poised for continued growth. The absence of bearish reversal patterns in recent candlestick formations supports this projection.

In conclusion, the overall trend for the S&P 500 is bullish, especially if it sustains above the critical level of $4,280. The confluence of technical indicators, chart patterns, and moving averages suggests that the index is likely to test higher resistance levels in the short term. Investors should keep an eye on the aforementioned support and resistance levels for potential entry and exit points.

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