The S&P500 stock index has suffered a sharp selloff for the past few days but might be due for a bounce since it is testing a major trend line visible on the weekly time frame. Some stock index analysts say that the massive equity selloff we’ve seen lately was merely a correction from the strong uptrends in the past.
A bounce in the S&P500 stock index could mean a recovery in the US equity market and in global stock markets. The recent selloff was seen to have been spurred by the rout in China, even as the government and central bank have taken measures to stem the declines.
Stock Index Bounce?
Apart from that, the weakness in the US stock index is also blamed on the lack of hawkishness of the US central bank. The minutes of their latest policy meeting revealed that officials are seeing improvements in the job market but are still not sold on the pickup in inflation. Although one member was open to hiking rates in July, majority of the committee members opted to wait for more data.
The selloff in the stock market could force the Fed to push back their tightening time line much later, possibly until December or early next year. This could lead to a downturn in sentiment for the US market, as consumers and businesses price in the view that the economy wasn’t as strong as expected.
Nonetheless, the S&P500 stock index appears to be finding support near the 1800.00 level for now. The 100 SMA is still above the longer-term 200 SMA, confirming that the uptrend is likely to resume at some point. In addition, both stochastic and RSI have reached overbought levels, suggesting that selling pressure is fading and that a bounce is due.
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