S&P 500
The S&P 500 index is nearing a key milestone today. It is up by 0.30% and is a few points below its all-time high of $3,392. Other indices are also in the green, with the Dow Jones and Nasdaq 100 gaining by 0.20% and 0.65%, respectively. The fear and greed index has also jumped to 72, sending a signal that investors have gotten a bit greedy.
The key catalyst for the S&P 500 index rally is news that the US and China will postpone a review of the first phase trade deal that was signed in January this year. This happened after a virtual call between the two sides that was scheduled for Saturday failed to happen because of scheduling reasons. Analysts believe that postponing the talks will give China more time to buy more goods as it agreed.
Another catalyst pushing the S&P 500 index higher is the weaker US dollar. The dollar index, which measures the strength of the dollar against a basket of currencies, declined by more than 0.10% today. The currency has dropped against key peers like the Japanese yen and the euro. A weaker dollar is a good thing for the S&P 500 index because most constituent companies are net exporters. As such, a weaker dollar becomes beneficial because it makes their goods less expensive.
Deal making is another reason why the S&P 500 index has gained today. In recent weeks, the number of deals in the US has been rising. Among the most popular ones are the Seven & I holdings acquisition of Speedway and Analogue Devices acquisition of Maxim. Today, it was reported that Sanofi was acquiring Principia BioPharma for about $3.7 billion.
Meanwhile, investors are getting greedy. The fear and greedy index, which was developed by CNN Money has moved further to the greedy territory, as seen below. All the main components of the index are in the green. For example, the put and call options, stock price breadth, and junk bond demand are in the extreme level. Market momentum, stock price strength, and safe haven demand are also in the greed level. Only the market volatility is neutral.
The daily chart below shows that the S&P 500 index has been in an upward trend since March. This price is above the 50-day and 100-day exponential moving averages. Also, it is slightly below its record high of $3,392. The momentum indicator has also remained above zero for the past few weeks. Therefore, I suspect that the S&P 500 will continue rallying as bulls attempt to move to the highest level on record.
On the flip side, a move below $3200 will invalidate this trend. This price is at the intersection of the 50-day EMA, the lowest point on July 30, and the ascending trend line.