S&P500 (SPX) Price Analysis – July 28, 2023

Daily Price Outlook

Yesterday, the S&P 500 index remained relatively stable at 4566, with a small decrease of -0.02%. This followed the expected quarter percentage point hike in interest rates by the US Federal Reserve, which led to a year-to-date high.

The Fed's post-meeting statement showed a bias for "additional policy firming," but Fed Chair Powell's remarks during the press conference seemed more cautious, emphasizing a data-dependent and patient approach for future rate decisions. This approach has raised market optimism that US interest rates may have peaked, which has improved risk appetite. 

There are several reasons for market optimism, including positive earnings season, strong global growth, and potential for additional stimulus in China. However, several factors present risks, such as extreme optimism, overbought conditions, overcrowded positioning, and seasonal headwinds. 

Yesterday, US equities had mixed results, with the S&P 500 showing little change after the Fed's rate hike to combat inflation. The performance of S&P 500 stocks was mixed as well, resulting in its value remaining relatively stable.

Some gainers included Alphabet (GOOGL), which saw a 5% increase due to better-than-expected revenue from Google ad sales, Union Pacific (UNP), which surged 10% following the announcement of a new CEO, and Boeing (BA), which performed well with shares rising 8% after reporting lower-than-expected quarterly loss and increased plane deliveries. 

On the other hand, some notable losers included Texas Instruments (TXN), which experienced a 5% drop in shares due to a slowdown in demand impacting profit and sales estimates, and Microsoft (MSFT), whose shares fell 3% after its third-quarter guidance missed estimates, largely attributed to a slowdown in its Azure cloud and Windows PC businesses.

Additionally, CoStar Group (CSGP) and Allegion Plc (ALLE) both faced declines of 8% and 7%, respectively, as CoStar cut its full-year revenue guidance, and Allegion Plc lowered its full-year sales forecast, both citing factors affecting demand in their respective industries. The mixed performance across these stocks contributed to the overall stability of the S&P 500 index, keeping its value relatively unchanged.

 S&P500 (SPX) - Technical Analysis

On the technical front, the S&P 500 index has exhibited a significant bearish candle on the three-day timeframe, commonly referred to as a "bearish engulfing" candlestick pattern. This candle has fully engulfed all the previous trading activity on July 24th, indicating a strong bearish sentiment among investors as the S&P 500 index closed in the red.

Furthermore, the index has broken below another important trend line that was providing support around the 4555 level. The closing of candles below this trend line suggests a high likelihood of a continued downtrend for the S&P 500 index.

On the downside, there is potential support around the 4530 level, and a substantial breach of this level could lead the SPX price to its next support level at 4500. Further continuation of the downtrend could bring the S&P 500 index down to the 4490 level.

Conversely, if the S&P 500 manages to hold above the 4530 level, it may find the potential to reach the next resistance level at 4560, and further strength could lead to resistance around 4580. Careful monitoring of these support and resistance levels will be crucial for traders as they navigate the current market conditions.