On 2 August, we analysed the S&P 500 (US SPX 500 mini on FXOpen) chart, where we:
→ Constructed an ascending channel A-B with a median line shown as a dotted line;
→ Highlighted the risk of a bearish breakout (as indicated by the red arrow).

Since then:
→ The price dropped by more than 5% to the 5 August low, doubling the width of the A-B channel towards point C – the B line became the median of a wider channel. The index’s decline was driven by recession fears, based on weak US labour market data;
→ However, the price then began to recover from the lower boundary of the wider channel, indicating that recession fears have subsided and the rally continues;
→ The price has now returned close to historical highs.

Yesterday, the minutes from the FOMC meeting on 30-31 July were released, revealing that the vast majority of participants noted that if data continues to align with expectations, it might be appropriate to ease policy at the next meeting.

The S&P 500 (US SPX 500 mini on FXOpen) index remained largely unchanged on this news – this indicates market participants’ belief that interest rates will likely be cut in September, which would stimulate economic growth, company performance, and stock indices.

Technical analysis of the S&P 500 (US SPX 500 mini on FXOpen) chart today shows that:

→ On 7-8 August, bears attempted to resume the downward trend but failed;
→ In mid-August, price action made the trendlines shown in purple relevant;
→ On 15 August, the B line was confidently broken (indicated by the blue arrow);
→ The dotted line is showing signs of resistance.

Thus, it is reasonable to assume that bulls have regained control of the market after the sharp decline in the S&P 500 (US SPX 500 mini on FXOpen) in early August. If the sentiment remains unchanged, we could see attempts to reach a new historical high.

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Filed under: News - @ August 22, 2024 10:20 am