Technical Analysis

S&P500 (SPX) Price Analysis – April 05, 2024

By LonghornFX Technical Analysis
Apr 5, 20243 min

Daily Price Outlook

The S&P 500 index has been unable to stop its downward rally and is still flashing red for the day. Investors have witnessed several days of losses, with the index dropping by more than 1% on the day. This downward trend continued as the Dow Jones Industrial Average also faced declines for the fourth consecutive day. However, the reason for its downward trend can be attributed to the cautious stance taken by Federal Reserve officials regarding potential interest rate cuts.

This suggests a reluctance to implement interest rate cuts, which can affect investor expectations and confidence in the market's future performance. This uncertainty often leads to selling pressure and volatility in the S&P 500 as investors adjust their positions accordingly.

Federal Reserve's Caution Impacts S&P 500

On the US front, Federal Reserve officials have adopted a cautious approach toward potential interest rate cuts. This caution stems from concerns about inflation and the need for consistent improvement in economic indicators before considering rate adjustments. Minneapolis Fed Bank President Neel Kashkari hinted at the possibility of rate cuts but emphasized that they might not be necessary if inflation remains stable. Therefore, this stance was seen as hawkish, which has influenced investor sentiment and added pressure on the S&P 500.

Escalating Geopolitical Tensions Add to S&P 500 Uncertainty

In addition to the cautious approach by the Federal Reserve, the ongoing escalating geopolitical tensions have further dampened investor confidence in the S&P 500. It should be noted that the recent events, including heightened tensions in the Middle East following an attack on Israel's embassy in Syria, the ongoing Russia-Ukraine conflict, and a major earthquake in Taiwan, have contributed to uncertainty in the market. Investors are concerned about the potential impact of these geopolitical factors on global stability and economic growth, leading to hesitancy in equity markets, including the S&P 500.

Therefore, the S&P 500 index has faced downward pressure due to combined factors: cautious monetary policy outlook and geopolitical uncertainty. Investors closely monitor economic data and geopolitical developments for signs of future market direction.

S&P 500 Price Chart - Source: Tradingview
S&P 500 Price Chart - Source: Tradingview

S&P 500 - Technical Analysis

The S&P 500 index faced a downturn, shedding 1.23% to close at 5,147.20. This retreat situates the market near its pivot point of 5,130.97, a critical juncture that could dictate the short-term market direction. Resistance is in sight at 5,155.41, with further barriers at 5,178.50 and 5,216.52. Should the index ascend, these levels will be crucial to surpass to signal a stronger bullish sentiment. Conversely, immediate support is noted at 5,106.53, with additional lower thresholds at 5,239.60 and 5,278.98, potentially serving as floors in case of a further pullback.

The index's Relative Strength Index (RSI) at 41 indicates a tilt towards a bearish sentiment but not yet in the oversold territory. The 50-day Exponential Moving Average (EMA) is positioned at 5,210.98, slightly above the current price, suggesting that the market might be under pressure but with room for recovery.

Considering these factors, the market's posture leans towards caution with a bearish inclination. Investors might consider a strategic position to sell below 5,178, targeting a pullback to 5,129, while placing a stop loss at 5,213 to mitigate risk.

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