LAST Thursday (Oct 31), the S&P 500 index opened lower at 5,775.34 and continued its downward trajectory throughout the day, reaching an intraday low of 5,702.86. By market close, the index had fallen 108.22 points, or 1.86 per cent, to finish at 5,705.44, marking another day in the red.
Before the market opened, the US Core Personal Consumption Expenditures (PCE) Price Index for September showed a year-on-year increase of 2.7 per cent. This figure slightly exceeded the forecast of 2.6 per cent and matched the previous reading of 2.7 per cent. The higher-than-expected inflation data weighed on market sentiment, contributing to the S&P’s lower opening.
Microsoft’s shares fell nearly 6.05 per cent despite the technology giant reporting stronger-than-expected first-quarter results. Similarly, Meta’s shares slipped 4.09 per cent, even after reporting better-than-expected third-quarter results.
Currently, the S&P 500 is trading around 2.95 per cent below its recent peak of 5,878.46, recorded on Oct 17, 2024. A critical resistance level remains near the 5,850 mark, a zone the index has struggled to surpass in recent sessions. The 100 per cent Fibonacci level aligns closely with this area, which creates a key resistance barrier where breaking above it could indicate a shift towards renewed bullish momentum, although recent economic data presents a challenging backdrop.
If the index continues to decline, the first and immediate level of support is anticipated around the 50-day Exponential Moving Average (EMA) at approximately 5,700, which aligns with the 78.6 per cent Fibonacci level, indicating a strong support area. A further drop could see the index testing the 100-day EMA near 5,580, where stronger support is expected to stabilise any deeper correction.
The Relative Strength Index currently reads 41.68, indicating neutral to slightly bearish momentum. Should the RSI approach oversold territory, it may present a buying opportunity for long-term investors looking to enter the market at lower levels.
The writer is equities specialist at PhillipCapital
