S&P 500 Momentum Report

S&P 500 stands less than 2% from its year-to-date high

The S&P 500 has registered its third straight week of gains, as further dips in US treasury yields and a weaker US dollar continue to be supportive of risk-on sentiments. Thus far, rate expectations have been well-anchored for a peak in US interest rates, finding validation from the downside surprise in US inflation lately while basking in hopes of a potential soft landing ahead. Ahead, the 200-day moving average (MA) for the US dollar will be put to the test this week, with any breakdown of the key trendline potentially setting the stage for more gains in Wall Street.

Thus far, market sentiments have reverted back into ‘greed’ territory from previous ‘fear’ territory, but remain a distance from extreme overbought conditions which suggests some room for bullish sentiments to push on further. Market breadth has also been on the rise, which points to more broad-based participation in the market rally. Notably, small-caps (Russell 2000) have rallied 8.5% over the past month, versus the S&P 500’s 7.8% and DJIA’s 6.7%.

The Federal Open Market Committee (FOMC) minutes will be in focus amid the holiday-shortened week, which is likely to reiterate the Federal Reserve (Fed)'s more cautious tone on tightening but for rates to stay high-for-longer. Previously, the central bank noted that the risks of doing too much versus too little on inflation was ‘more balanced’ and sticking to its usual script will likely keep rate expectations unchanged for a prolonged Fed rate hold ahead.

Technical analysis: S&P 500 eyeing for a retest of its year-to-date high

After a break above its Ichimoku cloud resistance and a downward trendline on the daily chart, the S&P 500 is now standing less than 2% away from its year-to-date high at the 4,600 level. On the weekly chart, a bullish crossover has been formed on moving average convergence/divergence (MACD) while its weekly relative strength index (RSI) heads further above its key 50 level, pointing towards building positive momentum in place. Ahead, the 4,600 level will present the next level of resistance to overcome, with any successful break potentially leaving its January 2022 all-time high at the 4,800 level on watch next. On the downside, the 4,400 level may be support to hold, where its 100-day MA stands.

Source: IG charts

Sector performance

Market sentiments remained risk-on last week, with the S&P 500 delivering its third straight week of gains and all 11 S&P 500 sectors were in the green. Defensive sectors (healthcare, consumer staples) generally underperformed amid the stronger appetite for risk-taking, while gains in the energy sector were capped by some indecision in oil prices. On the other hand, real estate and financials managed to pull ahead with a close to 4% gain. Big tech stocks resumed their moves higher as well, notably with a 5.3% weekly gain in Tesla. Ahead this week, Nvidia will be the last of the ‘Magnificent Seven’ to release its results, which may hold the key to dictate whether the tech rally can have more room to run this week. Year-to-date, both the technology and communication services sectors are up close to a stellar 50%, while the consumer discretionary sector is up 32%.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 14th – 20th November 2023.

Source: Refinitiv
*Note: The data is from 14th – 20th November 2023.

Source: Refinitiv
*Note: The data is from 14th – 20th November 2023.