Last week the SNP500 saw a strong bullish trend and recorded its first positive week after a three-week consecutive decline. The price increased by 6.08% and recovered the losses seen in the previous week. However, the price this week has slightly lost momentum.
The price-performance yesterday was bland with little volatility. The price on Monday declined by 0.30% and today's futures show a 0.14% decline, which again is not indicating anything significant. So why did the SNP500 see such a strong trend last week, and was unable to continue the trend over the past 24 hours?
Last week the price of the stock market was influenced by not only developments in the market but also technical factors and correlations. One of the main drivers had been the price of Oil and a new correlation between Oil prices and the stock market.
The price of oil had seen a 3-week decline which measured 16.60%. This has sparked rumors that the price of oil may drop below $100 per barrel and that company’s gasoline expenses may decline. Overall this increased investors' confidence. The price of oil may have also influenced investors this week as the price once again increases over the past 3 days. The price increase has investors feeling anxious again and this can also be seen in the price.
Another factor has also been the fear of recession easing amongst investors and the poor performance of less risky assets. Last week the Federal Reserve, as well as the Treasury, had worked hard to convince investors and citizens that a recession was not for certain even with higher interest rates. This was also paired with stronger economic statistics such as a higher than expected Home Sales figure and Durable Good orders. The question is whether confidence will also continue throughout this week or whether it was a short-lived trend.
Technical factors also played a part in last week’s trend and possibly this week’s lack of a trend as well. The price had recently reached a price low ($3,635) not seen since November 2022. As we are now only 3 weeks away from the next earnings season, the discounted price may have prompted investors to enter at the lower price in order to position themselves for July’s Earnings report.
It should be noted that a similar movement was seen on the 22nd of May. The SNP500 witnessed a strong upward trend over a period of 5 days measuring 6.54%, however, the asset again lost momentum and declined to new price lows. Therefore it is important for traders to monitor the price movement over the coming days.
The price is likely to continue being influenced by recession fears, the monetary policy as well as oil prices. The new factor which is likely to start influencing the price is the earnings season which is approaching. The banking stocks are likely to also see high volatility as US banks announce higher dividends and buyback plans.
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