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Analysis: The S&P500 index: higher than ever

The famous American index is on top while the US economy is showing several signs of growth deceleration. But what factors help the market to go higher and higher?

There has been an obvious and significant slowdown in the US market during the 1st quarter of 2015. At the beginning of the year, investors were expecting a stronger economic recovery, with J. Yellen considering a further rate rise after a series of really good statistics related to employment at the end of 2014

All of the following statistics have disappointed the investors by not meeting the forecast (Employment / NFP/ GDP), so the FED hasn’t raised the rate yet saying that they remain “patient”, waiting for better confirmed results. This has caused a temporary drop in the US Dollar against all the majors, but has pushed the US indexes into historical highs -especially on the SPX which has reached the 2133pts level.

More recently, we have seen a slight improvement regarding building permits in the US (now 1.14M versus 1.06 expected) and the start of new construction (1.06M versus 1.02M). ‘But we will have to wait for further strength signs to see a rate hike, especially on the employment and the non-farm payroll’ stated J. Yellen.

Despite all of these statistics, the biggest concern of the FED remains the inflation rate, which is currently below zero (-0.1%); when it should ideally be 2.0% in order to implement further improvements on the labour market.

 Technically speaking, on a weekly basis the market has been trading inside a bullish channel since 2011 – the trend is still bullish. The RSI remains in the buying zone, above 50%, whereas the CCI is giving a real directional signal by clearing the 100 level. On a more short term view (daily chart), we notice that the market is evolving in the upper side of the long term bullish channel, above a short term one.

It has cleared the 2110pts price level while the RSI indicator came across its dynamic resistance.

This is seen as a strong bullish signal and it might be that investors will keep their long positions above S1 (2110pts) in order to reach the 2180/2200 points level.

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Pierre Veyret

Technical Analyst
Pierre entered the finance industry after learning from professionals the importance of behavioral finance and money management. His real specialty lies in technical analysis that he studied in depth with…


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The thoughts and opinions expressed here are solely those of the writer and do not necessarily reflect the view of ActivTrades Plc. This commentary is for information purposes only and should not be considered investment advice. Any forecasts given are not a reliable indicator of future performance and the decision to act on any ideas and suggestions presented is at the sole discretion of the reader.