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The S&P 500 climbed by the most in three weeks on Wednesday as Federal Reserve meeting minutes boosted investor confidence and there was some upbeat economic data out of the world’s largest economy.
The rally comes after a five-day losing streak which saw the index drop back below the 2,000 level. Concern over a Greek election campaign and the continued deterioration in oil prices has had stock markets on the back foot so far this year, but markets saw some relief on Wednesday with benchmark indexes all climbing by over 1%.
In particular, the S&P 500 advanced after US jobs data came out on the positive side and the US trade deficit was shown to narrow. Comments from Germany’s Angela Merkel also helped markets as the Chancellor said that the door was still open for more debt-relief talks with Greece.
Meanwhile, FOMC meeting minutes from December revealed that most policy makers agree that April is too early to begin raising interest rates. The concern is that inflation will remain low enough for now and this argument is strengthened by the most recent downward pressure on oil prices.
Technicals & Outlook
It ended up being a good day for technical traders as the S&P 500 moved steadily higher through the course of the session.
The index opened on it’s pivot before moving gradually higher up to the first resistance around 2,025. Those gains look like carrying on overnight and we are seeing a decent bounce in crude oil futures and Asian equities at the time of writing.
Looking ahead, we see continued gains in equities over the next few days. Even though most indicators are bearish, the S&P 500 is oversold on a short term basis and we see an upward move developing towards the 2,060 level.
Further out (next few weeks), we are also bullish and see a move up to 2,110 as a distinct possibility. But the pattern is terminal (converging trendlines, overlapping waves), the risk is the S&P 500 could turn down before reaching the top.
Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk
