S&P 500 Hits New Highs: How Long Can the Breakout Last?
As the S&P 500 achieves new highs, we delve into the conflicting factors influencing its potential sustainability.
S&P 500: Bullish Technical Backdrop
The S&P 500 rallied over 13% in the last two months of the year, driven by expectations of Federal Reserve rate cuts. However, as the new year unfolds, economic data revealing persistent inflationary pressures has tempered market exuberance, hinting at the possibility of prolonged higher interest rates.
Despite this subdued sentiment, the S&P 500 broke and closed above its 2022 highs on Friday. Examining the S&P 500 price chart across the weekly and daily timeframes, several factors indicate the potential continuation of the breakout:
1. Strong Close: Friday’s price action saw the S&P close on its highs, indicating strength and conviction behind the breakout.
2. Keltner Channels: The breakout remained within the Keltner Channels, signalling that prices are not overextended.
3. RSI Regains Momentum: The RSI indicator is not in overbought territory and has recently regained momentum.
S&P 500 Weekly (left) and Daily (right) Timeframes
Past performance is not a reliable indicator of future results
Broad-Base Falls Away as Tech Dominates
At the sector level, the broad-based strength of the S&P has diminished since the start of the year. The Sector Snapshot reveals that only 4 out of the 11 sectors have seen gains in the last seven sessions, with Tech leading the way. If the Tech rally loses steam, there's a risk of the market retreating below the breakout highs.
US Sector Snapshot (7-Days)
Past performance is not a reliable indicator of future results
Risk Management:
Those looking to take trades in the S&P 500 should consider incorporating ATR into their stop placement as this will dynamically account for current levels of price volatility.
On the economic calendar this week, US earnings season remains in full swing with the likes of; American Express, Comcast and Netflix reporting Q4 numbers. While on the economic calendar, US fourth-quarter GDP figures will be published on Thursday.
Disclaimer: This is for information and learning purposes only and is intended for UK audiences. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
S&P 500: Bullish Technical Backdrop
The S&P 500 rallied over 13% in the last two months of the year, driven by expectations of Federal Reserve rate cuts. However, as the new year unfolds, economic data revealing persistent inflationary pressures has tempered market exuberance, hinting at the possibility of prolonged higher interest rates.
Despite this subdued sentiment, the S&P 500 broke and closed above its 2022 highs on Friday. Examining the S&P 500 price chart across the weekly and daily timeframes, several factors indicate the potential continuation of the breakout:
1. Strong Close: Friday’s price action saw the S&P close on its highs, indicating strength and conviction behind the breakout.
2. Keltner Channels: The breakout remained within the Keltner Channels, signalling that prices are not overextended.
3. RSI Regains Momentum: The RSI indicator is not in overbought territory and has recently regained momentum.
S&P 500 Weekly (left) and Daily (right) Timeframes
Past performance is not a reliable indicator of future results
Broad-Base Falls Away as Tech Dominates
At the sector level, the broad-based strength of the S&P has diminished since the start of the year. The Sector Snapshot reveals that only 4 out of the 11 sectors have seen gains in the last seven sessions, with Tech leading the way. If the Tech rally loses steam, there's a risk of the market retreating below the breakout highs.
US Sector Snapshot (7-Days)
Past performance is not a reliable indicator of future results
Risk Management:
Those looking to take trades in the S&P 500 should consider incorporating ATR into their stop placement as this will dynamically account for current levels of price volatility.
On the economic calendar this week, US earnings season remains in full swing with the likes of; American Express, Comcast and Netflix reporting Q4 numbers. While on the economic calendar, US fourth-quarter GDP figures will be published on Thursday.
Disclaimer: This is for information and learning purposes only and is intended for UK audiences. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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