Investors’ insatiable risk appetite keeps S&P 500 forecast intact – for now
Risk appetite remained strong during Thursday’s session, with Bitcoin breaking through the $100K mark and the German DAX index hitting a record high above 20,300. In the US, both the S&P and Nasdaq reached new highs. Investors are eagerly awaiting the non-farm payrolls report on Friday, but so far, there is little sign of a decrease in risk appetite, keeping the S&P 500 forecast bullish. However, as the index climbs into overbought territory, investors may start to wonder when the « Trump trade » will be fully priced in, potentially leading to some market weakness.
When will the “Trump trade” be fully priced in?
Investors have been pouring funds into assets impacted by Trump’s election victory, but there is growing concern about whether the market has already priced in the effects of his policies on the US economy. Despite the markets being overvalued and close to overbought levels, investors continue to buy the dips. Until a clear reversal signal emerges, the bullish trend is likely to persist.
Technical S&P 500 forecast
The bullish trend that began in August is still intact, with higher highs and higher lows on the S&P 500 chart. While the index is reaching overbought levels, traders have consistently bought every dip. Currently, the S&P 500 is within a bullish channel, above key moving averages, and trading at record highs.
S&P starting to look a little overstretched
After a strong rally, warning signals indicate that the index may be overextended and in need of basing or consolidation before seeing further gains. The daily RSI is nearing overbought levels, but the monthly RSI remains elevated. The breach of the 161.8% Fibonacci extension level suggests extreme overbought conditions, potentially leading to profit-taking in the near future.
Key support levels to watch include 6027, 6000, 5882, and 5793 if a pullback occurs.
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