Technical Analysis

S&P500 (SPX) Price Analysis – Jan 12, 2024

By LonghornFX Technical Analysis
Jan 12, 20244 min

Daily Price Outlook

The global market failed to stop its downward trend and still flashing red on the day. This can be witnessed by the performance of S&P 500, a key indicator of the U.S. stock market, which experienced a modest dip as it closed near 4,780.24. Despite briefly trading above its previous record, the index edged lower by 0.07% on Friday.

In the meantime, the tech-heavy Nasdaq Composite closed at 14,970.19, while the Dow Jones Industrial Average faced a modest gain of 0.04%, closing at 37,711.02. This movement reflects the cautious sentiment in the market as investors are facing various factors influencing the economic landscape.

However, the recent fluctuations in the S&P 500 can be attributed to various global issues, unexpected data outcomes, and the lingering uncertainty surrounding the Federal Reserve's actions.

As we eagerly anticipate the release of quarterly performance reports from major corporations like Bank of America, Wells Fargo, and JPMorgan Chase, the future impact of these variables on the S&P 500 remains uncertain. The coming weeks will be crucial in unraveling the ongoing dynamics and determining the market's trajectory.

Impact of Geopolitical Tensions and Unexpected CPI Increase on S&P 500 Performance

Furthermore, the geopolitical concerns and unexpected data releases played a significant role in shaping the S&P 500's performance. Meanwhile, the U.S. and UK forces conducted attacks against Houthi targets in response to Red Sea incidents, heightening geopolitical tensions. These external factors contributed to a cautious market atmosphere, impacting investor confidence and influencing stock movements.

In the meantime, the uncertainty surrounding the Federal Reserve's monetary policy made things more complicated in the market. The December Consumer Price Index (CPI) revealed an unexpected uptick, with a 0.3% monthly increase and a 3.4% annual rise, surpassing economists' estimates. This inflationary pressure led to speculation about the Fed's plans for interest rate cuts.

Some investors hope for considerable rate cuts, but the Fed officials, like Cleveland Fed President Loretta Mester and Richmond Fed Chief Tom Barkin, suggest a cautious approach. The markets, however, still price in over a 65% probability of a rate cut in March, creating uncertainty around the future trajectory of monetary policy and influencing the S&P 500.

S&P500 (SPX) Price Chart – Source: Tradingview
S&P500 (SPX) Price Chart – Source: Tradingview

S&P500 (SPX): Technical Analysis

The S&P 500, a barometer of U.S. market health, is currently trading at 4,780.23, showing a marginal decline of 0.07%. The index's movements, closely watched by investors globally, offer insights into broader market sentiments. Today, it hovers near pivotal levels that could dictate its short-term trajectory.

Key price levels to watch include a pivot point at $4,741, with immediate resistance forming at $4,784. Further resistance is seen at $4,812 and $4,843. On the support front, $4,712 stands as an immediate cushion, followed by stronger levels at $4,667 and $4,639.

From a technical standpoint, the Relative Strength Index (RSI) reads at 60, suggesting a bullish inclination without veering into overbought territory. The Moving Average Convergence Divergence (MACD) currently stands at 2.66 against a signal value of 14.46, hinting at potential upward momentum. Furthermore, the index trading above its 50-Day Exponential Moving Average (EMA) of $4,760 indicates a short-term bullish trend.

Chart analysis reveals a double-top pattern, with a crucial resistance extending at the $4,800 level. A bullish breakout above this threshold could ignite a buying trend, while a failure to surpass it may trigger a sell-off.

In summary, the S&P 500 exhibits a cautiously bullish outlook. Investors should monitor these resistance and support levels, with a potential strategy involving a buy limit at 4764, aiming for a take profit at 4838, and a stop loss at 4716. As always, market dynamics can swiftly change, so staying vigilant to these technical indicators and patterns is key for traders.

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