- The US economy continues to grow as per previous projections, but investors continue to monitor economic data.
- US Durable Goods and the Weekly Unemployment Claims boost investors’ confidence.
- The SNP500 and US stock market retraced from their recent all-time highs, but remain stable on Friday.
- Investors turn their attention to this afternoon’s PCE Price Index.
SNP500 – Market & Technical Analysis – Steady On Friday!
On Thursday, the stock market had a day of two halves. The Asian and European market saw the SNP500 rise more than 80%, only to sharply fall 0.89% thereafter. The sharp decline was largely triggered by pending orders and profit taking before weakening. Investors are also slightly cautious about geopolitical tensions over the weekend and weekend risk.
The risk appetite within the market remains shaky and dependent on the performance of the economy. The main factor for the stock market is for interest rates to fall but for economic data to remain stable. The VIX index throughout this morning’s Asian session rose by more than 1.00% which is known to provide an indication of a lower risk appetite. However, currently the VIX has fallen to +0.56%. If the VIX does not again rise, the SNP500 potentially may witness a sideways price movement while investors remain cautious before the weekend.
However, the economic data could trigger volatility if the release differentiates from what the market is pricing. Investors are currently awaiting the release of the Core PCE Price Index which analysts believe will show a 0.2% increase. The Core PCE Price Index has not shocked investors since April. If the release does read different to 0.2%, market participants can expect stronger momentum. For buyers to regain control of the market, ideally the index will read 0.1% or below as this could prompt a dovish Federal Reserve.
Yesterday’s US GDP data showed the economy grew by 3% in quarter 2, up from 1.6% in quarter 1. However, this is unlikely to sway the Federal Reserve’s focus on unemployment rather than growth. Labor market data was mixed: initial jobless claims rose to 218,000, below the 224,000 forecast, while the total receiving assistance increased slightly to 1.834 million, compared to the 1.828 million estimate.
When monitoring the individual stocks of the SNP500, most of the high impact stocks traded lower this morning. Of stocks holding for than 1.00%, 65% are trading lower. Investors will monitor how this changes once the US stock exchange opens. Nonetheless, 65% give a slight bearish bias so far, but this may change once the US market opens.
In terms of technical analysis, the price continues to trade above the trend line and price sentiment indicator on the 2-hour chart. This has been the case since the SNP500 rose in value on September the 11th. The RIS also continues to trade above the “neutral” level and witnesses no divergence which is a good sign. However, time in the short term will be vital for investors and stronger momentum may assist with this.
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Michalis Efthymiou
Market Analyst
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