Technical Analysis

S&P500 (SPX) Price Analysis – March 22, 2024

By LonghornFX Technical Analysis
Mar 22, 20244 min

Daily Price Outlook

The S&P 500 index maintained its upward rally and remained in the green on Friday. The index rose by 0.3%, holding its position above the key level of 5,200. While the tech-heavy Nasdaq and the broader market S&P 500 weakened slightly, the Dow Jones Industrial Average led the gains, buoyed by strong performances from blue-chip stocks like Goldman Sachs (GS).

However, the market's positive momentum was mainly driven by Federal Reserve Chairman Jerome Powell's comments hinting at three potential quarter-point rate cuts in 2024. This indication from the Fed chairman sparked optimism among investors, driving the markets higher. Furthermore, upbeat economic projections from the Federal Reserve, including an upgraded GDP forecast and expectations of lower unemployment and higher inflation, contributed to the positive sentiment.

Fed's Projected Rate Cuts and Labor Market Data Impact

On the US front, the Federal Reserve suggested they might lower interest rates three times in 2024, according to Chairman Jerome Powell. This news boosted the S&P 500 index as investors felt more confident in economic support. Lower rates mean borrowing money becomes cheaper for businesses and individuals, encouraging more spending and investment. This positive outlook lifted stock prices, signaling optimism in the market.

In addition to the Fed's monetary policy outlook, the latest data from the US Department of Labor (DOL) provided further support to the market. The report indicated a decline in Initial Jobless Claims to 210,000, signaling a strong labor market. This positive development eased concerns about the economy and contributed to the overall optimism driving the S&P 500 higher.

US S&P Global Composite PMI Impact

On the data front, the US S&P Global Composite Purchasing Managers' Index (PMI) for March came in slightly lower at 52.2, down from 52.5 in February. While the reading remained above the neutral 50-mark, indicating expansion in economic activity, the slight decline raised some concerns among investors. However, the Manufacturing PMI improved to 52.5, surpassing market expectations, which provided a counterbalance to the softer Composite PMI figure.

Hence, the mixed PMI data had a muted impact on the S&P 500 index. Investors remained focused on the broader economic outlook and monetary policy signals from the Federal Reserve, which continued to drive market sentiment.

Antony Blinken's Comments Boost Investor Confidence

On the geopolitical front, US Secretary of State Antony Blinken's remarks regarding the ongoing talks aimed at reaching a ceasefire in Gaza and the release of hostages boosted investor confidence. The news of progress in negotiations made investors feel better, so they reacted positively in the stock market, including the S&P 500 index. This reassurance helped boost confidence among market participants, leading to a favorable response in stock prices.

Investors were happy about possible peace talks in the area, as it could reduce tensions and make the world more stable. Blinken's positive remarks boosted confidence, leading to a hopeful mood in the market. This helped push the S&P 500 index upward.

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

S&P 500 - Technical Analysis

On March 22, the S&P 500 slightly receded, marking a 0.32% decrease to close at 5241.54. This movement reflects a nuanced interplay of market forces, as investors weigh various economic signals. The index currently rests just below its pivot point at 5252.68, suggesting a finely balanced market sentiment. Resistance levels are poised at 5272.40, 5296.35, and 5325.23, indicating potential hurdles for upward movements. Conversely, support levels at 5224.51, 5199.15, and 5178.02 delineate key zones where the index might find footing should it face further downward pressure.

The Relative Strength Index (RSI) at 66 edges towards the overbought territory, hinting at possible market retraction. Additionally, the presence of a Doji candle in the 4-hour timeframe, followed by robust upward momentum, suggests that a bearish correction may be imminent, particularly as the index has surged beyond its 50-Day Exponential Moving Average (EMA) of 5108.19, indicating a significant upward trend in recent times.

Given these observations, a cautious approach is advised for traders. A sell limit order at 5255 presents a strategic entry point, targeting a take profit at 5220 and setting a stop loss at 5270 to mitigate potential risks. This outlook underscores the current market's sensitivity to short-term fluctuations, urging investors to remain vigilant.

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