The S&P 500 Index (CME: ES) sustained an impressive 1.64% gain this week, eyeing a sixth week of gains in seven, propelled by Nvidia’s extraordinary rally. The chipmaker’s historic one-day gain of $277 billion catapulted the index to new record highs, with the Dow and Nasdaq following suit.
Nvidia’s AI-driven surge prompted a tech sector rally, with Carvana and Block echoing the enthusiasm. As the market consolidates after Thursday’s exceptional gains, the AI-fuelled momentum is expected to persist, supported by robust Q4 earnings across various sectors. Corporate earnings exceeding estimates and a rebound from the prior week’s turbulence further contribute to the positive sentiment.
Technical Analysis:
On the 4-hour chart, the futures are hovering around 5,097.25, consolidating above key SMAs after reaching a new all-time high on Thursday. The 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line) are all comfortably above the price action, indicating a bullish trend. The recent 20-SMA’s bullish crossover with the 50-SMA underlines upward momentum. However, the RSI (71.34) sits in overbought territory, suggesting a potential pullback before further upward momentum.
Short-term trading opportunities could exist towards the 5,066.50 should the index sustain a push lower. A break below the initial support would leave the 5,027.50 and 4,993.00 support levels as the next significant barriers lower.
However, a push above the recently reached all-time high could offer short-term trading opportunities towards the 23.60% Fibonacci extension level at the 5,129.50 price level. A break above the initial extension would bring the 50.00% Fibonacci extension level (5,254.00) and 61.80% Fibonacci extension level (5,165.00) into play in the short term.
Summary
The S&P 500’s outlook remains positive in the medium to long term, supported by strong fundamentals and the AI narrative. However, a short-term pullback is possible after the recent surge, especially with overbought technical indicators. Short-term pullbacks may target 5,066.50, followed by major support at 5,027.50 and 4,993.00. Conversely, a breakout above the recent high opens doors to the 23.60% Fibonacci extension at 5,129.50, with further targets at 5,254.00 and 5,165.00.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters, S&P Global.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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