The S&P 500 Index Has Reached a Significant Resistance Level

Analyzing the S&P 500 chart (US SPX 500 mini on FXOpen) on April 26, we wrote about how the April decline could be a correction to the lower boundary of the channel within the 2024 rally. Following this, a logical development would be for the bulls to attempt to resume the upward trend and make another attempt to breach the 5250 level.

Today, May 15, the price of the S&P 500 index (US SPX 500 mini on FXOpen) is at the 5250 level after a bullish breakout of the trendline (shown in red) that delineated the correction.

The price has risen by approximately 4.5% since the beginning of May as earnings season has not been disappointing, and traders anticipate the Federal Reserve will ease monetary policy.

Is further index growth possible?

Ben Snyder, Senior US Equity Market Strategist at Goldman Sachs, is positive in the long term but notes that:
→ the S&P 500 index has already surpassed the 5200 target level indicated by the bank's analysts;
→ an obvious risk of growth lies in the fact that companies may need to significantly raise profit forecasts.

Fundamental background has a significant influence on the dynamics of the S&P 500 index (US SPX 500 mini on FXOpen). For example, yesterday Producer Price Index (PPI) data was released. According to ForexFactory: PPI m/m actual = 0.5%, expected = 0.3%, a month ago = -0.1%.

The initial market reaction was a decline in the price of the S&P 500 index (US SPX 500 mini on FXOpen) – perhaps market participants were spooked by rising producer prices and the prospect of higher Fed rates. However, this was followed by a statement from Fed Chair Powell, who reassured the markets. According to him:
→ the next Fed move is unlikely to be a rate hike;
→ the PPI data is more "mixed than hot", considering that the previous period's data was revised downwards.

The chart of US SPX 500 mini on FXOpen shows that:
→ the price is moving within an upward channel;
→ an intermediate trendline (shown with blue dots) within the upward channel is providing support;
→ after the PPI news, the price tested (as indicated by the arrow) this intermediate trendline;
→ at the same time, the price also tested the 5200 support level;
→ Powell's subsequent comments added positivity to the market, and the price rose towards the important 5250 level we mentioned earlier.

Market participants are now focused on the next set of important news: Consumer Price Index (CPI) data and Core Retail Sales will be released today at 15:30 GMT+3.

It is possible that evidence of inflation slowing down will lead to an increase in the S&P 500 index (US SPX 500 mini on FXOpen), as this will strengthen market participants' belief in an imminent rate cut. In such a scenario, the index price could reach a historical record.