S&P 500 Momentum Report

All eyes on US CPI data this week

Thus far, the S&P 500 has gained for the second straight week, rallying close to 7% from its October 2023 low as bets of peak US interest rates continue to mount. However, into the new week, risk sentiments are reverting back to its usual cautious stance in the lead-up to the upcoming US consumer price index (CPI) data. The data will be key in dictating how bets may shift for the Fed’s next move in December, along with providing validation for rate cuts being priced in the second half of 2024. Given the series of Fedspeak this week, the data may also drive the tone from policymakers in terms of any pushback against previous dovish expectations.

In terms of the S&P 500, momentum has been positive lately with a reversion in MACD back into positive territory while the index reclaimed its 200-day MA. Sentiments and market breadth have improved from previous oversold territory, but trading at around neutral levels may suggest that there are still room for previous bearish sentiments to unwind. The VIX continues to trade below the key 20 level, which still puts a risk-on environment in place. Seasonality in November has also generally been more positive, but the mid-November may see some consolidation moves before performance improves towards month-end.

Technical analysis: S&P 500 back to retest near-term trendline resistance

Following the sharp rally over the past two weeks, the S&P 500 is now back to retest a near-term trendline resistance at the 4,420 level. Recent moves could still mark a near-term consolidation within a broader upward trend, with any move above the trendline resistance potentially paving the way towards its July/August high at the 4,520-4,600 range. On the downside, the 4,300 level may be immediate support to hold.

Source: IG charts

Sector performance

A look at sector performance over the past week revealed outperformance in rate-sensitive growth sectors, as big tech stocks firmed. The technology sector pulled ahead with a 7% gain, supported by positive performance in semiconductors, along with a 3% gain in Microsoft and Apple. On the other end of the performance table, the energy sector underperformed with a 3.8% dip into the red last week. Weakness in oil prices has not been supportive for the sector lately, with oil prices falling for three straight weeks as market participants price out the risks of a wider Middle East conflict, along with an uncertain demand outlook from softer global economic conditions.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 7th – 13th November 2023.

Source: Refinitiv
*Note: The data is from 7th – 13th November 2023.

Source: Refinitiv
*Note: The data is from 7th – 13th November 2023.