Technical Analysis

S&P500 (SPX) Price Analysis – Nov 10, 2023

By LonghornFX Technical Analysis
Nov 10, 20234 min

Daily Price Outlook

Global market sentiment failed to stop its bearish trend and declined on Friday, as U.S. stocks ended the day on a lower note. This marked the end of the Nasdaq and S&P 500's longest winning streaks in two years. However, the reason for its downturn can be linked to the higher Treasury yields, triggered by statements from Federal Reserve Chair Jerome Powell.

Therefore, Federal Reserve Chair Jerome Powell's statements, which resulted in higher Treasury yields, significantly impacted the global market, leading to a downturn and concluding the extended winning streaks of the Nasdaq and S&P 500.

Impact of Jerome Powell's Remarks on Market Dynamics

Federal Reserve Chair Jerome Powell's remarks played a significant role in undermining market sentiment. His remarks about uncertainties in managing inflation and the potential for additional rate hikes prompted caution among investors. The market experienced a shift in sentiment as these factors influenced trading decisions. This marked the end of an extended period of positive momentum for the Nasdaq and S&P 500, underscoring the importance of economic indicators and central bank communication in guiding market trends.

Powell expressed uncertainty regarding the sufficiency of current interest rates to control inflation, indicating a potential for further rate hikes. Consequently, there was a decline in stocks, with the Dow falling by 0.65%, the S&P 500 losing 0.81%, and the Nasdaq dropping 0.94%. Powell's hawkish stance implies a dedicated commitment to combatting inflation, contributing to market caution.

Despite a recent robust rally, these declines represented the most significant one-day percentage drops since late October. Initially, traders were expecting unchanged rates in 2023, but Powell's comments altered expectations, with rate cuts now anticipated later in 2024. Furthermore, a Labor Department report indicated a slight decrease in jobless claims, reflecting a stable job market despite existing concerns.

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

S&P500 (SPX) - Technical Analysis

Analyzing the S&P 500's current technical position reveals a market at a crossroads, encapsulated by its recent price action. At present, the index is stationed around 4,347.36, reflecting a modest retreat within the last 24 hours. This level is crucial as it forms a pivot in the near-term market narrative.

The chart, set on a 4-hour time frame, lays out a battleground for the index's next directional push. Immediate resistance is charted at 4,398.81, with further barriers at 4,283.25 and a more significant ceiling at 4,516.82, which if overcome could signal a stronger bullish momentum. Conversely, the index finds immediate support at 4,301.64, followed by lower defenses at 4,218.90, and the psychologically important 4,000.77 level that could staunch any downward pressure.

The Relative Strength Index (RSI), positioned at 59.09, indicates that while the index is not in overbought territory, there is some bullish sentiment at play. This reading suggests that the market is more optimistic than pessimistic, but not yet signaling a strong bullish conviction.

The 50-day Exponential Moving Average (EMA) is marked at 4,301.64, just beneath the current price, hinting at a potential support zone that bulls will aim to defend. Holding above this EMA could foster a short-term bullish bias, while slipping below could invite bearish sentiment.

The chart pattern reveals a descending channel, which typically indicates a bearish trend. However, the index is currently testing the upper boundary of this channel. A decisive break above could reverse the bearish outlook and signify a trend shift.

In conclusion, the overall trend for the S&P 500 shows tentative bullish signals, with the RSI above 50 and the index challenging the upper boundary of the descending channel. The short-term forecast suggests that if the index sustains its position above the 50 EMA and breaks through the immediate resistance, we could see it testing higher levels in the near future.

Should it fail to breach the channel's upper limit, the index may retrace towards the support levels, especially the critical 4,000.77 point, which could confirm the bearish sentiment depicted by the descending channel pattern.

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