In this post, I share my SP500 technical and fundamental analysis. No doubt, the SP500 is in a long-term bullish trend till we have low interest rates and Fed supports the market. But, what about the short-term tendency? Let’s find out.

Fundamental analysis

Stock bulls have struggled to find fresh news last week. Economic data as of late has sent some mixed messages, with the recovery clearly expanding in some areas but still appearing stalled in others. Weekly Jobless Claims came in higher than expected and the previous week was also revised up sharply, indicating the job market is far from rebounding.

Housing Starts also disappointed a bit, falling -6.0% to a seasonally adjusted annual rate of 1.580 million last month. However, the slower-than-expected homebuilding was largely blamed on skyrocketing lumber prices and other climbing input costs. That narrative feeds right into increasing concerns about inflation, which is unmistakable in some areas like housing and food prices, and now energy prices with this week’s winter storms.

Last week also saw mortgage rates climb to their highest levels since November, averaging 2.81% for the week ending February 18, up eight basis points from the week prior. Rising mortgage rates are trailing Treasury yields, which hit their highest levels in a year earlier this week. Fed officials have been out in force talking down the risks of inflation, though, echoing the sentiments of many bulls that believe any price increases are going to be temporary, both now and post-pandemic.

mortgage rates

News that can have a short-term impact on SP500

The timeline for an end to the pandemic is still the second half of 2021. At the same time, the Biden administration is again increasing the number of vaccines being sent to 13.5 million a week to states and will also be sending +2 million doses per week directly to local pharmacies. So in total, around 15.5 million doses a week should now be getting distributed, with supplies expected to continue ramping up and a greater number of more doses being sent.  JNJ is saying they are still committed to supplying +100 million doses of its one-shot vaccine by June. The administration’s top medical adviser estimates that vaccines will be available readily to the general public by mid-May or early-June, and expects most all Americans (who chose to be) will be inoculated by late summer.

More housing data is on deck next week with the S&P Case-Shiller Home Price Index on Tuesday, New Home Sales Wednesday, and Pending Home Sales on Thursday. 

Also, Earnings highlights coming up next week include Berkshire Hathaway, Dell, Etsy, Home Depot, Lowes, Nvidia, Salesforce, and Square. It’s worth mentioning that Berkshire Hathaway’s vice-chairman and legendary investor Charlie Munger will headline the Annual Meeting of Shareholders of the Daily Journal Corporation next week. The event will be live-streamed on Yahoo Finance on Thursday.

SP500 Technical analysis

sp500 analysis

We have a clear channel up on the daily chart. Every time price touches its upper range we see a rejection. So, we need some really significant fundamental factors to break up above this range and sustain. Based on recent economic data it seems unlikely to happen. Moreover, based on the cycle forecast we can expect a pullback of 5 – 10% in the coming few weeks. Besides, Advance Decline Line shows early signs of weakness. 

There is no strong bearish setup at the moment in SP500, but taking into account all mentioned above factors, I see a high chance for a pullback. Certainly, if the price breaks above the daily channel and sustains above it, it will be a game-changer. Other than that, we can see a retest of 3830 or even 3770 in the coming weeks. 

If you want to know when I buy and sell SP500 make sure to subscribe to my technical analysis of the financial markets.

Wishing you a great week!

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