Technical Analysis

S&P500 (SPX) Price Analysis – March 29, 2024

By LonghornFX Technical Analysis
Mar 29, 20244 min

Daily Price Outlook

The S&P 500 index maintained its upward rally and was still flashing green on Friday. This can be witnessed as the Dow Jones rose slightly to a new record, while the S&P 500 also hit a new high. The Dow and S&P 500 marked their best two-quarter performance since 2020, with gains of 18.8% and 22.5%, respectively, according to Dow Jones Market Data. However, the market's positive momentum was mainly driven by the prospect of interest rate cuts from the US Fed as a higher chance of a rate cut typically boosts the S&P 500 index.

Federal Reserve's Interest Rate Outlook and its Impact on the S&P 500 Index

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. Investors are expecting three rate cuts from the Fed this year, as the central bank has kept its benchmark borrowing rate steady at 5.25%-5.50% for the fifth consecutive time. However, the central bank still predicts three quarter-point cuts by year-end. Traders are currently estimating a 63% chance of a rate cut in June.

However, the higher chance of a rate cut typically boosts the S&P 500 (SPX) index. as lowering interest rates can stimulate economic activity by making borrowing cheaper for businesses and consumers, which often leads to increased spending and investment. This optimism about future economic growth tends to lift stock prices, including those of companies listed in the S&P 500 index. So, a higher chance of a rate cut is generally seen as positive for the SPX.

In contrast to this, hawkish Fed comments and robust US economic data could cap gains in the SPX. On the data front, the US Gross Domestic Product for the fourth quarter of 2023 showed a surprising uptick, expanding by 3.4% annually, surpassing market expectations of a 3.2% increase. The GDP Price Index remained stable at a 1.7% rise, as predicted. However, Core Personal Consumption Expenditures slightly missed expectations, coming in at 2.0% quarter-on-quarter. Additionally, Initial Jobless Claims dropped to 210K, defying forecasts of a slight increase from the previous week's 212K.

Geopolitical Tensions in Israel and Impact on Global Markets

On the geopolitical front, the conflict between Israel and Gaza escalated with Israel's Prime Minister considering a ground invasion to secure the release of soldiers. Meanwhile, the International Court of Justice accused Israel of genocide in its military campaign in Gaza, demanding immediate aid provision. As of the latest report, the death toll includes over 32,000 Palestinians killed and 75,000 wounded, while there have been 1,139 Israeli casualties from Hamas attacks.

Therefore, the geopolitical tensions in Israel could introduce uncertainty into global markets, impacting the SPX index. Investors may react cautiously to the escalating conflict, which could lead to increased market volatility and downward pressure on the SPX.

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

S&P 500 - Technical Analysis

On March 29, the S&P 500 (SPX) posted a modest increase, closing at 5254.34, up by 0.11%. This slight uptick reflects a cautious optimism in the market, with the index hovering around key technical levels. The current pivot point is set at 5232.00, with immediate resistance observed at 5281.33, followed by higher thresholds at 5297.10 and 5316.01. These levels suggest potential ceilings where the index might face selling pressure.

Conversely, support is established at 5231.74, with subsequent levels at 5212.87 and 5198.29, which could provide buying opportunities if declines occur. The Relative Strength Index (RSI) stands at 64, indicating a somewhat overbought condition but not excessively so, suggesting that there is still room for upward movement. The 50-day Exponential Moving Average (EMA) at 5152.02 supports a bullish undertone, reinforcing the index’s resilience above this moving average.

Given these factors, the technical outlook for the S&P 500 is cautiously optimistic. A trading strategy could involve selling below 5265, with a take profit target at 5232 and a stop loss at 5280.

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