S&P 500 Price Analysis: There has been some bearishness leading into key events next week

  • A soft end to the week for the US bourses as the S&P 500 trades 0.94% lower on Friday.
  • A whole host of issues including an escalation of tensions with China sent equities lower.

Fundamental backdrop

Intel and Western Digital are among the worst performers in the S&P 500 on Friday. Intel is the 12th largest company in the index and the share price has fallen a massive 16% after the company pushed back the launch of its new chip due to production difficulties. AMD is one of the biggest beneficiaries of the Intel debacle and the stock has risen over 16% in the session. 

On the macro side of things, relations between the US and China are still tense. After the US closed the Chinese Embassy in Huston, Texas the Chinese retaliated with a closure of the US consulate in Chengdu. This area is close to a place where the US is watching the humanitarian crisis against the Muslim population close to the area. There is also the small matter of more fiscal stimulus being added on Monday. The US government is set to approve another USD 600 billion but this is lower than the initial USD 1 trillion or so first touted. 

Next week there is also the latest Fed rate decision, statement and press conference to digest. The Fed is not likely to announce more stimulus or a change in rates but they will continue to state they will keep accommodation ample etc. Recent data has improved but there could be another lockdown in the US and the Fed might use this as an excuse not to act this time around. 

S&P 500 daily chart

The chart below shows that the last two sessions have been pretty bearish. There is a bearish divergence as the price made a higher high and the indicator made a lower high. The key support zone on the downside is at the 3167.50 area which was a pretty tough consolidation top in the past. Beyond that, the orange trendline that completes the wedge type pattern could be a support zone. Overall, the trend is still bullish and we are nowhere near the point of calling a reversal. 

S&P 500 Technical Analysis

Additional levels

 

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