S&P 500 Index has been showing a very positive price action since the start of 2023. At its peak in February, the index went as high as 4200 after gaining 311 points. Nevertheless, the price fell below 4000 once again on Thursday as the FOMC minutes were announced.
The latest FOMC minutes reveal that the Federal Reserve will likely remain hawkish in the coming months. During the first meeting of 2023, a few members even favored a 50 basis points hike. However, the majority agreed on a 25 basis point hike which was eventually announced.
The FOMC members also remained unsatisfied with the rate at which inflation is falling. Consequently, the majority agreed on reducing the Fed’s balance sheet and keep hiking the rates. Global markets had a pullback after the news, and S&P 500 futures closed at 3999.
S&P 500 index was founded in 1957, and since then, it has become a benchmark for US stock market. It gives its investors exposure to the 500 biggest companies listed in the United States. There are several ETFs of the S&P 500 also available that track the underlying index. A few popular ETF choices are Vanguard 500 Index Fund, the iShares Core S&P 500 ETF, and the SPDR S&P 500 ETF.
On the daily chart, S&P 500 (INDEXSP: .INX) broke out of the downward trendline in January 2023. This breakout pushed the price to tag 4200 in the 1st week of February. However, the SPX price got rejected from this level and closed below 4000 points yesterday. This corresponds to a 4.8% price decrease in a span of 3 weeks.
The 200 MA on the daily chart currently lies at $3,940. This will be a key level to watch, as a break below this level will be very bearish for US equities. If the SPX price fails to bounce from this level, then another retest of the year low at $3794 is also likely. This level will be a very critical level as a breakdown would invalidate most of the bullish thesis.
This post was last modified on Feb 23, 2023, 14:28 GMT 14:28