Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
The S&P 500 ETF Trust SPDR, represented by the symbol SPY (ISIN: US78462F1030), mirrors the performance of the esteemed S&P 500 Index. Currently, it faces a fourth consecutive week of decline, with a week-to-date dip of just over 100 basis points. This downturn stems from a notable shift in market sentiment towards safe-haven assets, particularly the U.S. Dollar and U.S. Bonds.
The recent Federal Reserve decision to halt interest rate hikes, coupled with a hint at another potential rate hike this year, set off a chain reaction. This prompted traders and investors to swiftly reallocate their portfolios, favouring safe-haven assets over riskier options.
The U.S. Dollar has surged, driven by its allure for higher yields, reaching its highest point in ten months. The prevailing narrative of “higher rates for longer” has driven U.S. bond yields to levels unseen in sixteen years, further propelling the ascent of the Greenback. September has marked a significant milestone, with the 10-year Treasury yield surging by over 45 basis points, breaching the 4.5% mark for the first time since 2007.
Source: Trive – TradingView, Nkosilathi Dube
Technical
The SPY ETF’s recent bullish trend has come to a halt, evident in its departure from the ascending channel pattern and a dip below the critical 100-day moving average. This shift in trajectory stems from underlying fundamental pressures, leading to a surge in selling momentum. Notably, the $451.07 level originated a sharp decline due to increased selling pressure, forming a resistance point.
The breach of the $433.01 prior support level signifies a prevailing bearish sentiment in the equities market. At present, the focus will likely turn to the $416.23 level, a potential point of interest for traders seeking to sustain the downward pressure.
However, with the RSI indicating oversold conditions as the price nears a significant support level, a reversal might be on the horizon. Should upward momentum regain strength, optimistic traders may set their sights on the $433.01 level as a potential upside destination.
Summary
The trajectory of the SPY ETF in the short term hinges on today’s U.S. unemployment data and Friday’s PCE Price Index. These crucial indicators hold the potential to influence market sentiment, especially amidst heightened expectations of impending rate hikes. Traders will scrutinize this data to gauge whether the Federal Reserve might opt for another hike this year. Of particular interest is the $416.23 level, as a breach below it could signal further downward pressure on the price.
Sources: Reuters, TradingView
