How has the S&P500 pushed through 3000?
Fiona Cincotta May 27, 2020 9:07 AM
S&P 500 is trading comfortably over the key psychological 3000 mark, a 37% rally from the mid -March low, a turnaround that seemed impossible just two months earlier.
The S&P closed up 1.2% in the previous session at 2991 after hitting a high of 3021. S&P futures are pointing to a jump on the open, taking the US index comfortably over the key psychological 3000 mark.
The rally is clearly not based on economic data, which continues to print a horror show. Almost 25% of the US working population has signed up for unemployment benefits, manufacturing and service sector activity remains deep in contraction, retail sales are at a record low and consumer sentiment is only very gradually lifting. The recovery in the market is well ahead of any economic recovery seen in macro data.
Instead the rally has been fuelled by extraordinary stimulus measures by the US Federal Reserve and other central banks across the globe, in addition to a $2 trillion rescue package from Congress and growing optimism of a covid-19 vaccine.
Inovio is the latest company to inform the market of progress in its vaccine development. The update comes hot on the heels of encouraging updates from Novavax, Modern and Oxford University to name a few.
The push high is also being driven by a rally in a handful of tech giants Facebook, Amazon, Microsoft, Apple and Google parent Alphabet. These tech giants make up around 20% of the weight of the S&P. These are stocks which jumped over the lockdown period as current conditions support the transition to tech.
The US lags around 2 months behind China in coronavirus crisis terms – both outbreak and recovery. China’s economy is showing a gradual recovery. The composite PMI is back above where it was at the start of the year despite halving in January, and factory profits are down -4.3% year on year, a significant improvement from the -35% decline in March, although still far from ideal.
Whilst initial jobless claims have been a strong focus over the past two weeks continuing claims will now attract more attention for signs of job seekers being re-hired as states reopen their economies. Whilst the S&P has risen higher regardless of horrendous jobless claims data, surely at some point if continuing claims don't show signs of improvement the push higher will reverse or at the very least start to slow? Regardless of what we think the S&P should be doing the chart is bullish.
S&P levels to watch:
The S&P trades above its 20, 50 & 100 sma on 4 hour chart, a bullish chart.
Immediate resistance can be seen at 3082 a psychologically key level prior to the coronavirus crisis March 5th high, prior to 3130 (high 4th March).
Support can be seen at 2984 (yesterday low) 2906 (low 22nd May) and 2760 (low 14th May).
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.