S&P500 (SPX) Price Analysis – Sep 06, 2024
Daily Price Outlook
The S&P 500 index has recently shown a subdued performance, struggling to dtop its downward momentum around the 5,503.41 level and hitting an intra-day low of 5,480.54.
This downturn has been influenced by disappointing ADP Employment Change data, reflecting uncertainty in market sentiment. The market remains on edge as investors await more clarity on economic indicators and Fed policy decisions while navigating the complexities of ongoing global conflicts.
Fed Rate Cut Expectations and Economic Data Impact on S&P 500
On the US front, the Federal Reserve's monetary policy outlook, combined with recent economic data, has been a crucial factor affecting the S&P 500. The CME FedWatch tool indicates that investors are anticipating a 59% chance of a 25 basis point rate cut and a 41% chance of a 50 basis point rate cut in September.
This expectation stems from the recent disappointing ADP Employment Change report, which showed a smaller-than-expected increase in private sector employment, with a rise of 99,000 in August compared to the consensus estimate of 145,000.
The weaker employment data, coupled with the anticipated US Non-Farm Payroll (NFP) report, which is expected to show a rise of 160,000 in August, has heightened speculation about potential Fed rate cuts. The Unemployment Rate is projected to decline slightly to 4.2%.
If the US employment data (NFP) falls short of expectations, the Federal Reserve might consider a 50 basis point rate cut instead of a smaller cut. This larger cut could lead to a weaker US Dollar because lower interest rates generally decrease the value of a currency.
As a result, a weaker US Dollar might impact the S&P 500's performance by affecting the value of investments and investor sentiment.
Impact of Gaza Conflict on Global Markets and the S&P 500 Index
On the geopolitical front, the situation in Gaza has become increasingly dire. UN spokesman Stephane Dujarric reported that over one million people in central and southern Gaza did not receive food rations in August, highlighting a "beyond catastrophic" humanitarian crisis.
Gaza’s Health Ministry has also noted that the Israeli military is blocking the entry of medical teams needed for a crucial polio vaccination campaign in southern Gaza.
Meanwhile, the increasing tensions remain high as Hamas accuses Israeli Prime Minister Benjamin Netanyahu of sabotaging a ceasefire deal by not withdrawing forces from Gaza’s border with Egypt.
The conflict has resulted in significant casualties, with at least 40,878 people killed and 94,454 wounded in Israel’s military actions against Gaza. Conversely, Hamas-led attacks on October 7 have claimed the lives of at least 1,139 people in Israel.
Therefore, the escalating Gaza conflict can create global uncertainty, leading to risk-averse behavior among investors. This heightened geopolitical tension may dampen investor sentiment and contribute to increased volatility in the S&P 500 index.
S&P 500 - Technical Analysis
The S&P 500 (SPX) is trading at $5,503.42, down 0.30%, with bearish momentum dominating the 4-hour chart. The index has been pressured by a broader market pullback, failing to break above key resistance at $5,572.63, the current pivot point.
A move above this level could trigger a bullish reversal, pushing prices toward immediate resistance at $5,641.79 and potentially extending gains to $5,699.82.
On the downside, immediate support rests at $5,441.61, with further downside risk towards $5,381.03 and $5,320.76 if selling pressure intensifies. The 50-day Exponential Moving Average (EMA) stands at $5,484.02, acting as a critical support zone.
A decisive break below this EMA could indicate deeper market weakness and open the door for additional declines.
The Relative Strength Index (RSI) currently sits at 42, reflecting mildly bearish sentiment. If the RSI slips below 40, it could signal a stronger selling wave, while a rebound above 50 would indicate renewed buying interest. For now, the technical landscape suggests caution, as the S&P 500 struggles to maintain upward momentum.
Given this setup, traders may consider an entry above $5,465, with a take-profit target at $5,575 and a stop-loss at $5,400. A breakout above the pivot point at $5,572.63 would confirm a bullish shift, but continued weakness below the 50-day EMA could lead to further downside risks.
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