Amidst a week marked by cautious sentiment, the S&P 500 Index (CME: ES) experienced a marginal 0.2% decline. The market witnessed mixed performances, with eBay surging 4% on dividend and buyback announcements, while Urban Outfitters plummeted 11% due to disappointing quarterly results. Mega-cap tech stocks like Tesla, Apple, and Meta Platforms showed varied movements. Durable goods orders in January contracted more than expected, indicating a 6.1% decline, the sharpest since April 2020.
Investors are awaiting the US inflation reading on Thursday and the Eurozone data on Friday, which will influence the Federal Reserve’s and European Central Bank’s interest rate decisions. Despite the upcoming data, the market remains optimistic, supported by solid earnings reports and the potential for future rate cuts. This optimism is evident in the “teflon” behaviour of the market, shrugging off negative news and focusing on positive aspects like AI’s potential to boost revenues.
Technical Analysis:
The 4-hour chart shows that the index is currently trading flat around 5,097.50, following a break below the 20-SMA (green line) but still comfortably above the 50-SMA (blue line) and 100-SMA (orange line), which maintains an upward trend. The recent crossover of the 20-SMA above the 50-SMA, coupled with the upward trajectory of the 100-SMA, suggests a potential bullish bias. However, the recent break below the 20-SMA introduces a note of caution.
The RSI currently sits at 52.30, indicating neither overbought nor oversold conditions. However, its downward slope suggests a loss of momentum. Short-term trading opportunities could exist towards the 5,027.50 should the index sustain a push below the 5,066.50 price level. A break below the 5,027.50 support level would leave the 4,993.00 and 4,959.25 support levels as the next significant barriers lower.
However, a push above higher could find significant resistance at the recently reached all-time high of 5,123.50. A break above the all-time high would bring the 23.60% Fibonacci extension level (5,149.00) and 50.00% Fibonacci extension level (5,254.00) into play in the short term.
Summary
The S&P 500 faces a crucial juncture. A sustained break below 5,066.50 could trigger a decline towards 5,027.50 and potentially lower. Conversely, overcoming resistance at 5,123.50 could open the door for further upside. The upcoming inflation data and the index’s ability to hold support or break resistance will be crucial in determining its short-term direction.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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