S&P500 (SPX) Price Analysis – Sep 08, 2023

Daily Price Outlook

The global market sentiment unable to stop its bearish trend and remains negative, thanks to the ongoing worries about the Federal Reserve's hawkish stance and issues in China. Notably, the S&P 500 Futures have been declining for four consecutive days, currently sitting at their lowest level in a week at around 4,468.

Meanwhile, the US 10-year Treasury bond yields hover around 4.30%, near the recent high of 4.29%, while the two-year bond yields have dropped from their weekly peak to 5.01%, marking their first daily loss in four days. Hence, the market is facing a bearish trend, with no signs of improvement due to fears of slower economic growth and recession in China.

Moving on, traders are keeping an eye on China's foreign trade data for August and speeches from several Federal Reserve officials. However, worries about economic slowdowns in China, the Eurozone, and the UK are conflicting with concerns about a soft landing in the US. This contrast is maintaining a risk-off sentiment in the market.

Global Economic Concerns Impact Investor Sentiment

It is worth noting that the recently released disappointing Caixin Services PMI in China, coupled with uncertainties surrounding China's stimulus efforts, have heightened concerns about a potential economic downturn in Beijing. Furthermore, escalating tensions between the United States and China regarding trade and Taiwan are further fueling the risk off sentiment in the market.

Meanwhile, the economic reports from the Eurozone and the United Kingdom indicate a downbeat economic outlook. This is making investors even more cautious. Thus, these factors are contributing in risk-off sentiment in the market, with investors opting for lower-risk options.

China's Economic Measures and Global Tensions Impact Investor Confidence

As we all are well aware China has been taking steps to boost its struggling economy after facing challenges during the pandemic. However, they have implemented various policies, and more are expected soon. Nevertheless, investor confidence is still low because of worries about China's weakening economy and the ongoing trade disputes with the United States.

These concerns might reduce the demand for precious metals. In the meantime, the G20 leaders' summit is happening this Saturday in New Delhi. President Joe Biden will attend, but Chinese President Xi Jinping won't be there. This exacerbates the already damaging relationship between the two superpowers countries.

Strong US Economic Data Drives Dollar Confidence

The US Dollar Index (DXY), measuring the US dollar's performance against other major currencies, is hovering around 104.90, near its highest level since April. This is driven by positive news about the US economy, including lower-than-expected Initial Jobless Claims at 216K (compared to an expected 234K) and an increase in Unit Labor Costs to 2.2% for the second quarter, in line with expectations. Thereby, investors expect a more hawkish approach from the US Federal Reserve with expected interest rate hikes of 25 basis points in November and December. This bolstering market sentiment and confidence in the US economy.

S&P500 (SPX) - Technical Analysis

The technical outlook for the S&P 500 presents a captivating picture. While there have been slight variations akin to light rain, the $4400 level captures my focus. A detailed look indicates the 50-day exponential moving average providing solid resistance around $4475.

What stands out is the affirmation from candle closures below this mark, indicating a potential downward trend. Examining the technical metrics, both the relative strength index and the moving average convergence divergence indicators remain stable in the sell zone, hinting chances of a bearish movement.

Furthermore, the S&P 500 showcases the potential to target the $4390 mark. Achieving this could set the stage for the next target at $4350. On the flip side, bullish cross above $4475 might push the index towards the $4500 or $4545 areas. Given these insights, it's wise to stay alert and consider a selling around the $4475 mark for the day.