SP500 Technical Analysis. New stimulus package

Can America’s new stimulus package save the stock market again? – We are about to find out. In this post, I share my SP500 technical analysis.

Bulls believe there is room to climb even higher with many U.S. citizens getting another $600 for passing “Go” and perhaps another $1,400 from “Community Chest”.

In addition, buyers are also looking to continued low interest rates and energy prices, and the steadily progressing vaccine rollout. At the same time, we see an increased number of small business bankruptcies.

SP500 Technical analysis

There is a clear channel up on the daily chart. And, the price is just in the middle of it. With that in mind, we have a few levels to watch. If price finds support near the lower range of the channel (3720), we can see the next leg to the upside with a potential extension to 3900. If 37200 fails, the nearest support is at 3650. There is still no Advance Decline Line signal. However, based on the Cycles study we can expect deeper pullback and swing buy entry between March and April. So, the best, for now, is to focus on short-term trading from the mentioned above levels.

Fundamental Analysis 

New Stimulus Package

President-elect Joe Biden unveiled a new $1.9 trillion stimulus package, titled “American Rescue Plan”, which includes more direct payments to qualifying taxpayers, expanded unemployment benefits, a federal minimum wage increase to $15 an hour, extension of eviction and foreclosure moratoriums, changes to the child tax credit, $350 billion in state and local aid. 

The package also calls for more than $400 billion to combat the pandemic, including accelerating vaccine deployment and safely reopening most schools within 100 days of the spending bill’s passage. 

President-elect Biden’s package will likely sail through the House with the Democrats in control but he would need at least 10 Republicans to join all the Democrats in the Senate to overcome a filibuster.

Biden also plans to unveil another set of spending proposals in February which Washington insiders say will likely be larger than the Rescue Plan. That package is expected to focus on infrastructure, health care, and education.

Powell’s statements

Investors are also digesting comments from Fed Chair Jerome Powell who warned that central bankers should be careful not to pullback on easy monetary policy too early.

Powell’s comments come amid some concerns on Wall Street that the Fed might reign in asset purchases sooner than expected. Powell said the economy remains far from the Fed’s goals but he is optimistic about the recovery.

Powell did warn that a post-pandemic economy could even see some “exuberant spending” that pushes inflation higher but brushed off ideas surrounding “persistent” inflation, citing disinflationary trends across the globe. 

He also said any moves to ease asset purchases or raise interest rates would be broadcast well in advance. The Fed’s next policy meeting is January 26-27. 

News

Next week also brings fresh housing data, including Housing Starts on Thursday and Existing Home Sales on Friday. Earnings will also be on tap next week, with key results due from Bank of America, Goldman Sachs, and Netflix on Tuesday; Morgan Stanley, Procter and Gamble, United Health, and U.S. Bancorp on Wednesday; Charles Schwab, CSX, IBM, and Union Pacific on Thursday.

A

Don’t miss the opportunities in the broad market sectors over the next 6+ months.  2021 and beyond are going to be incredible years for traders.  Staying ahead of these sector trends is going to be key to developing continued success in these markets. 

If you want to survive trading these markets then you learn fairly quickly how important it is to protect against risk. I am here to help you find better trades and navigate these incredibly crazy market trends. I can help you preserve and grow your long-term capital with my managed investment accounts and market research that tell you when long-term trends are starting and ending. Don’t wait until it is too late!

Wishing you a great week!