S&P 500 Price Analysis August 2020 | SP500 to Rally on Covid Stimulus?

by birtanpublished on October 4, 2020

The remarkable recovery for stock markets continues with um the us stock market index the s p 500 setting fresh recovery highs again this week putting it very close to those all-time highs set in february this year but does this mean we're going to see new all-time highs for the s p 500 on now is the time to take the money off the table and perhaps look to sell short here's the s p for the year to date of course we had a strong markets or positive markets going into mid-feb then of course we had concerns about the the pandemic the coronavirus

Spreading and markets fell off a cliff for the s p trading down towards 2200 since then we've seen the market bounce back by um i think slightly more than 50 percent at the time recording trading at 33 28 ahead of the official market open and really eyeing up these um these all-time highs again up at 3 400. so i think it's a really interesting time for stock markets now we are seeing other markets like the nasdaq having burst through

Those old highs but the question is will the broader indices like the s p 500 do this so i think there are arguments here for for doing nothing for buying going with that recovery and actually thinking about selling short thinking about well is the market going to struggle up here so we'll look at some of these alternatives in the next part of the video um just take a look at what trades we have at the moment so trade's doing well at the moment we've got like those gold trades various

Gold trades that have been running for a while we've got 2770 open profits the euro trade uh up 1400 pounds on that a couple of other trades in there with smaller profits and one loss but no s p trade however in the last video we did play some orders so on the 23rd of july we did place an order to buy the s p at 3 200 if it slipped back now i'd never use the phrase unlucky when it comes to trading but i think we were maybe a bit unfortunate so we placed the order

On the 23rd of july the 24th of july it did trade down within a couple of points of that level at 3200 and came back to it again uh towards the end of july trading down to 32.04 so just missing our buy order and the market of casa course soared up uh without us we'll see if we can address this uh in the next part when we look at some of the some of the potential trades out there for now i'll talk about what's driving the market

The levels to watch then we'll come back and look at this in more detail hello i'm david jones from capital.com and i thought it was time uh we did an update on the broader u.s stock market index the s p 500 as you saw there from the charts uh that recovery from those march lows is still going uh we're within a whisker of the the all-time highs uh from february it's a market i think that has um surprised a lot of people and definitely defied a lot of bearish calls

As the market continues to push higher so in this video i'll talk about what's driving it what to look out for then as usual we'll jump back onto the charts and look to uh to set a trade up and see actually if this time around we can get some orders filled as usual if you're watching this if you could click on subscribe it does uh ensure we can continue to push out lots of regular content on the different markets that we cover uh during the week so let's get into uh

Some of the facts so the s p 500 uh broader u.s stock market index the dow is a popular one obviously but it's only 30 stocks the s p 500 as its name suggests 500 shares is now positive for the year and i think there are plenty of us who wouldn't have expected that uh as we saw it fall off a cliff in march but for the year to date the s p is up by around three percent so this means we are pushing back at that all-time high the all-time high was set in february just before the corona

Coronavirus pandemic really started to spread and spook all sorts of markets so at the moment the s p is around um i think it's just just under two percent as of wednesday's close away from those all-time highs but of course it's still lagging behind um the other indices the nasdaq for example has uh been setting fresh all-time highs on what feels like a fairly regular basis and of course tech has played its part in dragging the s p 500 up so we are seeing um you know

Bullish stock markets in all sorts of sectors there are a few things helping to drive this we are seeing better than expected uh corporate results uh for example disney came out this week uh posted a massive loss but because it wasn't as bad as expected we saw the stock lifted so um expectations are being beaten we know that central banks have played their part in trying to stimulate economies uh as their the pandemic spread in the u.s that the federal reserve has made it

Clear it expects interest rates to stay uh near zero pretty much uh until 2022. here in the uk today we've had an update from the bank of england saying that even though the uk is still facing a severe recession uh the economic impact is not as bad as it thought it was going to be a couple of months ago and i think all of this builds up to another acronym we've talked about fomo the fear of missing out as markets move higher

People piling uh afraid of missing the boat but i think there's also tina uh there is no alternative i think with raids so low uh investors are maybe stuck for places to put the cash so that the cash goes back into the stock market how long that lasts remains to be seen but at the time of recording it's a market that is still very strong of course this friday we have non-farm payrolls the monthly u.s unemployment numbers expect plenty of volatility over this um at the moment uh the forecast is

For around one and a half million jobs to be added to the us economy during july we'll find out what the actual number was friday lunchtime uk time uh that's 1 30 in the afternoon or 8 30 a.m in new york an hour ahead of the stock market open so when it comes to levels to watch i think the obvious one um 33.94 those all-time highs like i say uh the market's only two percent away from that now if it starts to sell off there is a lot of support where we could look for a bounce look for buying

Opportunities the really big one it's where we missed our auto game field uh 31.98 uh the lows from from early in july but let's put some color on these numbers and see about getting a trade on so here's our recovery trend in the s p let's just focus on price for now then we'll come back to the indicators so off those march lows that trend line has done a good job of supporting the price we have seen it towards the end of july

Slip slightly out of the trend line and then sort of go back uh to that trend so for me that trend is still valid because we've pushed out to fresh recovery highs so i just need to adjust the trend line but i think the really big level to watch it's an obvious one if we round it up it's 3400 the all-time highs from february the 20th so i do wonder if we're going to see a bit more back and forth at these levels with perhaps some nerves coming back in

On the other hand i think if it blasts through 3400 um like the nasdaq we can probably expect further gain so i think it is a tricky market perhaps to call up here from a short-term trading point of view let's take a look at some of the indicators so the market looking at the rsi the 10 day rsi did go overbought third week of july and we did see i suppose a slight slide for a couple of days um the market shook this off and has pushed higher again and once

Again uh we're overbought but in a trending market as i often say you know these indicators will go overbought or move to an extreme pretty quickly so i don't know how much weight we put on that at the moment looking at the macd down here i don't think we're getting much off the macd to be honest um you can see it's uh because volatility has been fairly low fairly tight range on the macd so not too much either way for this one so for me at the moment it's all about price let's take a look

At the shorter term charts so here's the hourly chart on the s p going back to the middle of july so going back about three weeks or so and you can see how important that 3200 level has been so so for me even if we did see let's say we got um a knee jerk bad reaction to uh the payrolls i'd still be looking to buy on weakness there are still lots of pockets of support and i think only if 3200 breaks do we have to start looking for

A deeper a deeper sell-off so for now from a really short-term trading point of view i'd still be looking to buy the dips we've got support at 32.80 from the 4th of august then we've got support again coming in ahead of 32.60 then 32.20 all these different pockets of support so for me if it got knocked back i'd still be looking to be a buyer so momentum is still positive i flipped this over to a four hour chart now and thirty four hundred this is the level so we are about

73 points away at the time of recording so what i'm going to do um i do think we're going to see it squeeze a little bit higher i would be inclined if i was watching the market during the day to be buying the dips what i'm going to do though i'm going to put an order in uh to buy if that 3400 level breaks um because i think momentum has been so positive it has defied many bearish calls on the way up uh and i think if we get above 3 400 anybody who is still short we'll see

People scrabbling to be buyers they'll be momentum buying coming in so i i do think if we see a breakthrough here we could see a bit more upside i'm just not sure in the short to medium term if we're going to see that level broken just yet so i'm going to leave an order just sitting there resting at 34.20 with a stop if you look at the swings on the s p you know 100 point swings over a week or so aren't unusual so i'm going to put 3420 and a stop in at 33.20 let me let me just

Set that up so i'm ready to go i'm going to buy 2.7 if the market gets the 3420 so i want to jump on any momentum if it breaks through those old all-time highs by 20 points and if that level gets filled put a stop in at 33.20 let's place that order and leave it sitting in my account i don't think that order is going to be filled in the next week famous last words i do think up at these our old all-time highs we

Are going to see a bit more to and fro perhaps a bit more of a traders market rather than a buy-and-hold market so i think it's going to be a really interesting month uh august for the s p 500 and we'll come back to it see how things are developing and see if we need to change that order but i think in the short term we could see it squeeze a bit higher from here dips still look to be buying opportunities but um i don't think it's gonna sail through that that old all-time high

Just yet that's it for this update we'll see what those payrolls look like and how the market reacts but from me david jones and capital.com good luck with your trading for more trading videos just like this please subscribe to our channel

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