Technical Analysis

S&P500 (SPX) Price Analysis – Feb 02, 2024

By LonghornFX Technical Analysis
Feb 2, 20243 min

Daily Price Outlook 

The global market sentiment has maintained an upward trend, still flashing green as the S&P 500 showed strength in its recent performance, bouncing back from a prior sell-off. On Friday, the index gained 1.25%, closing at 4,906.19, with the Dow Jones Industrial Average reaching a fresh record close of 38,519.84. However, the market rebounded after a dip triggered by Federal Reserve Chair Jerome Powell's post-meeting comments, where he downplayed expectations for a rate cut in March. Although this positive momentum in the S&P 500 was supported by strong earnings reports from key players like Apple, Amazon, and Meta. Therefore, the overall outlook remains optimistic.

Federal Reserve's Decision and Powell's Stance Impact on S&P 500:

The Federal Reserve's decision to maintain interest rates, coupled with Powell's cautious stance on rate cuts, initially led to a drop in equities. However, the decline was short-lived as positive factors, such as reports of a potential ceasefire between Israel and Hamas in the market and strong earnings reports from key players like Apple, Amazon, and Meta, helped equities regain traction. Therefore, the overall market sentiment remained relatively positive.

Powell mentioned that interest rates had peaked and could move lower in the coming months, but downplayed the probability of a March cut. However, this tempered market expectations and influenced investor confidence. Although bond yields also saw a decline, with the 10-year Treasury reaching a one-month low. Therefore, the market will closely monitor the upcoming jobs report for further insights into economic conditions.

Consequently, the Federal Reserve's decision to hold interest rates, along with Powell's cautious tone on rate cuts, initially caused a dip in equities, impacting the S&P 500. The market awaits the jobs report for additional economic insights.

Geopolitical Developments and S&P 500 Resilience

At the geopolitical front, reports of a potential ceasefire between Israel and Hamas were seen as another key factor that helped the S&P 500 stay positive. However, incidents like Houthi rebels claiming to strike a US merchant ship and US airstrikes in Yemen introduced some uncertainties in the market. Although geopolitical tensions usually impact market sentiment, the S&P 500 showcased resilience.

SP500 (SPX) Price Chart - Source: Tradingview
SP500 (SPX) Price Chart - Source: Tradingview

S&P500 (SPX) - Technical Analysis

The S&P 500 index today showcases a robust uptick, advancing by 1.25% to stand at 4906.18. This movement reflects a buoyant sentiment in the market, as indicated by the 4-hour chart analysis. The pivot point for today's session is identified at 4878.93, serving as a crucial juncture for short-term directional bias. Resistance levels are closely set at 4905.57, 4923.55, and an upper boundary at 4954.06, outlining potential targets for the bulls. Conversely, support levels are established at 4848.03, 4822.98, and 4797.40, offering a safety net against pullbacks.

The Relative Strength Index (RSI) at 60 signals a bullish momentum without veering into overextended territory. The 50-day Exponential Moving Average (EMA), positioned at 4803.14, underscores a solid uptrend foundation, further validating the index's strength.

Notably, the S&P 500 has completed a 38.2% Fibonacci retracement level around 4847, indicating a favorable zone for buyers. This level has become a springboard, suggesting potential for further ascension.

The technical landscape for the S&P 500 is decisively bullish, with a recommended entry point for long positions above 4880. Targets for taking profit are advised at 4930, while a stop loss should be considered at 4840 to mitigate potential downside risks.

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