Rising Markets and Bullish Momentum: S&P 500 Eyes New Highs Amid Fed Rate Cut Speculation

The S&P 500 is on an upward trend, approaching the resistance level of 5674.06, with bullish signals from technical indicators. Key price targets are 5826.19 and 6098.86, while support levels are set at 5572.90, 5478.96, 5385.01, and 5313.56.

August’s PPI data showed slight inflation increases, raising expectations for a potential Fed rate cut, likely 25 basis points. The stock market saw gains, with the S&P 500 up 3.8%, led by small caps and chipmakers, while oil prices rose and gold reached record highs.

Since August 5, the S&P 500 has been on an upward trend, reaching higher highs and higher lows with a dip to 5385.01. The index is now aiming to break through the resistance level of 5674.06, which was formed on July 16. The 20 and 50-period Exponential Moving Averages (EMAs), the Momentum oscillator, and the Relative Strength Index (RSI) all indicate a bullish trend. Specifically, the short EMA is above the longer EMA, and prices are currently above both EMAs. Additionally, both the Momentum oscillator and the RSI values are above the 100 and 50 baselines, respectively. Using the Fibonacci Retracement tool on the swing high of 5657.68 and the swing low of 5385.01, we can calculate two potential price targets: 5826.19 and 6098.86.

Should the bulls maintain market control, traders may direct their attention toward the four potential resistance levels below:

5674.06: The initial resistance is set at 5674.06, aligning with the peak reached on July 16.
5751.63: The second price target is identified at 5751.63, corresponding to the weekly resistance (R2) calculated using the standard Pivot Points method.
5826.19: The third target is established at 5826.19, aligning with the 161.8% Fibonacci Extension drawn from the swing high of 5657.68 down to the swing low of 5385.01.
6098.86: An additional price target is estimated at 6098.86, corresponding to the 261.8% Fibonacci Extension drawn from the swing high of 5657.68 down to the swing low of 5385.01.

Should the sellers take market control, traders may consider the four potential support levels listed below:

5572.90: The first support is identified at 5572.90, corresponding to an internal trendline passing through daily highs and lows, also coinciding with the weekly support (S1) estimated using the standard Pivot Points method.

5478.96: The second line of support is seen at 5478.96, aligning with the weekly Pivot Point (PP) calculated using the standard method.

5385.01: The third line of support is established at 5385.01, representing a daily low marked on September 6 and coinciding with the 50% retracement between the low point of 5091.15 and the high point of 5674.06.

5313.56: An additional downward target is observed at 5313.56, reflecting the 61.8% Fibonacci Retracement between the low point of 5091.15 and the high point of 5674.06.

In August, the US producer price index (PPI) increased slightly following a downward revision of the previous month’s figures, while inflation indicators tied to the Federal Reserve’s preferred gauge remained muted. Additionally, jobless claims rose modestly. Analysts suggest the PPI data leaves open the possibility of a larger, 50-basis-point rate cut from the Fed, although a 25-basis-point cut is more widely expected.

The stock market rallied, with the S&P 500 seeing weekly gains of 3.8%, the Nasdaq 100 rising 5.84%, and the Dow Jones increasing 2.21%. Small caps, measured by the Russell 2000, advanced 2.61%. Chipmakers like Nvidia led gains, while Micron Technology dropped after a downgrade. Wells Fargo shares also declined. Oil prices increased, and gold reached a record high.

The PPI data mirrored consumer price index (CPI) trends, reinforcing expectations of a rate-cutting cycle by the Fed, with markets predicting an initial 25-basis-point cut. Analysts see small-cap stocks, which have underperformed recently, as likely to benefit from the upcoming easing of monetary policy.

In conclusion, the S&P 500’s upward trend, supported by strong technical indicators and key resistance levels, suggests a bullish outlook, with primary targets of 5826.19 and 6098.86. Traders should monitor these levels closely, as well as the identified support areas.

Modest inflation data and rising jobless claims bolster expectations for a Fed rate cut, likely 25 basis points, which has contributed to a broad stock market rally. Gains led by small caps and tech stocks, alongside rising oil prices and record-high gold, indicate that market sentiment remains positive, particularly for sectors that are expected to benefit from monetary easing.