As US index futures hint at a subdued start today amid lingering concerns about stretched valuations, especially on the S&P 500.
Awaiting key data releases, investors remain watchful for any clues on market direction ahead of the long holiday weekend.
With the S&P 500 chart displaying a persistent bullish trajectory and shallow pullbacks, traders should remain poised to capitalize on any dips within the prevailing uptrend.
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US index futures were pointing to a flattish open on Wall Street, as we enter the last trading day of the first quarter and ahead of a long holiday in the US.
Following a robust quarter for US markets, we may see at least one last hurrah, even as concerns about overstretched valuations persist.
The bulls remain in charge, and dip-buying strategies continue to be favored over bearish ones until the charts tell us otherwise.
What are traders watching today?
Hawkish comments from the Fed’s Christopher Waller overnight helped to support the US dollar more than it weighed on index futures.
The EUR/USD, for example, dropped to a 5-week low in early European trade, with the single currency also being hit by further weakness in German data.
Stateside, investors will be watching the release of the University of Michigan’s sentiment surveys and the usual weekly jobless claims data. Jobless claims are expected to tick up slightly to 212K from 212K previously.
S&P 500: Can the rally continue?
Well, you can’t argue against it given how strong the trend is right now and given the lack of major bearish catalysts.
There is, however, a long weekend risk, with two major events on Friday that have the potential to impact the short-term direction of asset prices.
The main macro event of the week is arguably on Friday, when the core PCE index, the Fed's preferred gauge for inflation, comes out.
However, the US stock market will be closed for Good Friday, meaning that we could see the impact of any large deviations in PCE data at Asian open next week.
What’s more, Fed Chair Jerome Powell will also be speaking on Friday. Together, these events might provide the market with additional understanding regarding the Fed’s intentions concerning interest rates.
The closure of the stock market on Good Friday means investors will have to take into account the long weekend risk today, which includes the possibility we could see hotter-than-expected inflation data.
Additionally, expect to see some volatility related to portfolio rebalancing following what has been another strong quarter for the markets.
Stocks have surged in these three months of the year thanks to an AI-inspired rally and the prevailing optimism that the Federal Reserve will initiate interest rate cuts later in the year.
The S&P 500 has soared about 25% since late October. So, there are concerns that positioning may be overstretched and that the markets are vulnerable to short-term profit-taking.
But markets can remain irrational, longer… you know the rest.
SPY technical analysis and trade ideas
The chart of SPY, which tracks the S&P 500, continues to look bullish as it remains inside a multi-month rising channel with shallow pullbacks.
Since hitting a low last November, the underlying broad index of large market-cap stocks has continuously achieved higher highs and lows, pushing SPY to record levels with it.
During this period, it has not experienced even a pullback of 2%, which goes to show how relentless the rally has been. With the trend bullish, there isn’t a lot of point in trying to pick the top until the charts tell us that the bullish trend is over.
What’s more, the RSI is not at extremely overbought levels yet. Every time it has risen above the threshold of 70, it has worked off its overbought conditions through consolidation, rather than a sell-off. Therefore, dip-buying strategies are the ones traders should continue to concentrate on until the trend flips to a bearish mode.
With that in mind, keep an eye on the support trend of the bullish channel around the 518 area. For as long as this holds, the bulls will be happy, even if the index were to retreat a little ahead of the long holiday. The 518 area is also a resistance-turned-support level.
On the topside, the isn’t much in the way of resistance given that we have been repeatedly hitting record levels. Liquidity above the previous all-time high of 524.11 is the next near-term target for the bulls, followed by the next round level at 530.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.