The S&P 500 Index (CME: ES) is nearing a record-high, closing just shy of its all-time peak as the year concludes with strong bullish momentum. Expectations of an interest rate pivot by the Fed in 2024 have become firmly entrenched, buoying sentiment for growth-oriented stocks. The recent dovish rhetoric from policymakers and signs of softening economic data have cemented this narrative.
The “Magnificent Seven” – Apple, Amazon, Microsoft, Alphabet, Meta, Tesla, and Nvidia – have been on a tear, contributing significantly to the S&P 500’s gains. Their earnings strength and potential to thrive in the AI-driven future continue to entice investors.
Year-end tax considerations and thin holiday trading volumes can amplify upward trends, potentially pushing the index towards record territory in the final trading session for the year.
Technical
The 4-hour chart shows that the S&P 500 has been trading within a rising wedge pattern for weeks, indicating a potential for a breakout or breakdown. The recent dip found support at the wedge’s lower trendline, offering a temporary reprieve for the bulls.
The 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line) all slope upwards, suggesting an ongoing bullish trend. The 20-EMA remains comfortably above the other SMAs, further reinforcing the bullish bias.
Short-term opportunities may arise towards the 4,851.75 resistance level. Further bullish strides could test the 4,872.00 resistance. Conversely, exhaustion of the upward move and possibly a break below the wedge could offer short-term trading opportunities towards the 4,816.25 support level lower. A break below the initial support would bring the 4,798.25 support level into play in the short term.
Summary
The S&P 500 is on the cusp of a historic milestone, but the path ahead is not without its challenges. While the fundamentals appear favourable for now, a potential shift in market sentiment, profit-taking after the year-end rally, or a technical breakdown from the rising wedge could derail the momentum.
Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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