Technical Analysis

S&P500 (SPX) Price Analysis – April 26, 2024

By LonghornFX Technical Analysis
Apr 26, 20244 min

Daily Price Outlook

Despite the easing fears about further escalation of geopolitical tensions in the Middle East, the S&P 500 index has failed to extend its upward trend and experienced a bearish trend around 5,048, hitting the intraday low of 4,990 level due to several factors including slower GDP growth and higher-than-expected inflation figures. These were seen as negative for the S&P 500, as they may indicate a potential slowdown in economic activity alongside inflationary pressures. Meanwhile, the geopolitical tensions in the Middle East, including artillery shelling and potential investigations into mass graves, contribute to market uncertainty, affecting the S&P 500.

Moreover, the S&P 500's recent downward trend was further bolstered by the Federal Reserve's hawkish stance on monetary policy. The Fed has indicated concern about inflation and has suggested that it may keep interest rates higher for longer. This has made investors wary about the future of the stock market, as interest rate hikes could reduce the attractiveness of equities compared to other investments.

US Economic Indicators and the Impact on the S&P 500

On the US front, the economy grew slower than expected in the first quarter of 2024, expanding by 1.6% compared to a previous reading of 3.4%, falling short of the 2.5% market expectation. Despite this, inflation have remained high, with the Personal Consumption Expenditures Price Index climbing at a 3.4% annual rate, surpassing the Fed's 2% target.

This news led to a drop in the US dollar to two-week lows near mid-105.00. However, the CME FedWatch tool indicates that the financial markets are pricing in less than a 10% chance of a rate cut in June, with the probability of a September rate cut dropping below 58%.

Investors are closely watching for another inflation report on Friday, expecting a 0.3% month-on-month increase in both headline and core PCE figures. Annual headline PCE and Core PCE figures are estimated to show a rise of 2.6% and 2.7% year-on-year, respectively.

Therefore, the slower economic growth alongside higher-than-expected inflation could weigh on investor sentiment, potentially leading to downward pressure on the S&P 500. The uncertainty surrounding future monetary policy decisions by the Federal Reserve adds to market apprehension, contributing to a cautious outlook for equities.

Geopolitical Tensions in the Middle East and the Impact on the S&P 500

On the geopolitical front, the recent tensions in the Middle East, particularly the conflict between Israel and Iran, had strong impact on the S&P 500 index. However, the geopolitical tensions in Gaza, including ongoing shelling and potential for conflict escalation, introduce uncertainty and impact investor sentiment, leading to volatility in the S&P 500.

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

S&P500 (SPX) - Technical Analysis

On April 26, the S&P 500 registered a slight downturn, with the index falling 0.46% to close at 5,048.41. This movement reflects a broader market sentiment marked by cautious trading amid varied economic signals.

The pivot point for today’s trading stands at 5,137.05, indicating the level above which traders might expect bullish momentum to resume. Immediate resistance is observed at 5,107.34, with further hurdles at 5,173.51 and 5,263.93. These resistance levels are key to determining the short-term directional bias of the index. Should the S&P 500 surpass these marks, it could indicate a stronger bullish momentum returning to the market.

Conversely, immediate support for the index lies at 4,953.05. Further support levels are found at 4,883.16 and 4,802.48. These levels are critical as they represent potential floors where the index could stabilize and rebound in the event of continued downward pressure.

Technical analysis shows the Relative Strength Index (RSI) at 44, suggesting that the market is neither overbought nor oversold, leaning slightly towards oversold territory. This might indicate potential for a recovery if market conditions stabilize. The 50-Day Exponential Moving Average (EMA) is currently at 5,102.24, slightly above today’s closing price, which suggests that the market is testing crucial support levels.

Given the current technical setup, a cautious trading strategy would be advisable. Placing a buy stop at 5,060 with a take profit target at 5,135 and a stop loss at 4,997 could capitalize on potential upward movement while mitigating downside risk.

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