SPX Analysis 13/10/2023

Fundamental Analysis

This week was crucial for the SPX index. In total we had 9 speeches from different FOMC members. It was also a busy economic calendar for the U.S stock markets and the DXY. We had Core PPI (MoM), PPI (MoM), FOMC Meeting Minutes, Core CPI (MoM) and (YoY), CPI (MoM) and (YoY), Inital Jobless Claims. Our analysis will start with the FOMC Meeting Minutes.

·         FOMC Meeting Minutes

Until this week, the argument had been evenly balanced on whether there would be an increase or not at the upcoming FOMC Meeting. The week started with less hawkish rhetoric on Monday from several FED speakers and has continued into the middle of the week. A majority of the members expressed concerns about ongoing downward economic risks and the risk of rising unemployment. According to the minutes, a significant portion of the participants views the future trajectory of the economy as highly uncertain. Even though the FED is committed to keep the interest rates unchanged, there is a suggestion about an additional rise of interest rates by the end of the year to reach the 2% inflation target of FED.


·         Core PPI and PPI

The Producer Price Index for final demand increased 0.5% in September, seasonally adjusted, the U.S Bureau of Labor Statistics reported, higher than expected from 0.3%. Over 40 percent of the September increase in prices can be linked to a rise in the index for gasoline. The index for final demand services (Core PPI) advanced 0.3% percent in September, higher than expected from 0.2%. For both Core PPI and PPI, a higher than expected reading should be taken as positive for the USD.


·         Core CPI and CPI

U.S headline inflation (YoY) in September was announced on October 12, with 3.7%, higher than the expected 3.6%. On the other hand, Core CPI (YoY) hit a 24-month low and dropped to 4.1%, lower than the 4.3% recorded last month. The CPI (MoM) in September came above expectations with 0.4% but lower than 0.6% recorded last month. The Core CPI (MoM) with 0.3% was same as the last month. The index for shelter was the largest contributor to the monthly all increase. An increase in the gasoline index was also a major contributor to all items monthly rise. For all of the CPI data, a higher-than-expected reading should be taken as positive for the USD.






Technical Analysis

Analyzing the daily chart of SPX, we can clearly see a shift in the overall market direction. Until the 27 July market top, the SPX was moving bullish resulting in higher lows and higher highs. After the 27 July market top, the trend has been shifted to lower highs and lower lows resulting in a downtrend. Although the PPI did not affect the SPX negatively, yesterday CPI announcements resulted in a negative way for the SPX, with a daily loss of -0.62%. Yesterday’s candlestick is called bearish engulfing, indicating a bearish move can take place. This bearish engulfing formation is meaningful for us because it occurred in the Fibonacci retracement level of 0.50, which is an important level. For the short-term support and resistance levels, checking the hourly chart, 4335-4338 region is the support level. The first resistance level is the 4380. We can see in the lower timeframe that a double top was formed at the 4385 level, which may indicate bearish move in the short term. The short term-medium trend can be changed to bullish bias, if the SPX makes a new high than the 4380 level.