STOCK MARKET OUTLOOK: S&P 500 PRICE MAY BE POISED FOR VOLATILITY AS POLITICIANS DEBATE NEXT CORONAVIRUS STIMULUS PACKAGE AMID PEAK EARNINGS SEASON
- S&P 500 Index begins the buying and selling week on its entrance foot after holding the three,200-price stage
- Inventory market volatility might speed up within the midst of earnings season and stimulus talks
- VIX ‘fear-gauge’ may sign investor demand for draw back safety (or lack thereof)
Shares simply notched a robust begin to the week with main US fairness indices posting beneficial properties throughout the board. The S&P 500 Index, Dow Jones, and Nasdaq climbed by 0.7%, 1.7%, and 0.4% respectively. Judging by S&P 500 worth motion, nevertheless, equities are nonetheless perched beneath final week’s excessive notched previous to the discharge of discouraging jobless claims knowledge.
| Change in | Longs | Shorts | OI |
| Each day | 4% | 4% | 4% |
| Weekly | 23% | -9% | 0% |
Nonetheless, a wholesome bounce off of the three,200-price stage on the S&P 500 Index seems to be to underscore this technical help zone going ahead. This space of buoyancy seemingly finds confluence with the bullish development prolonged by means of the June 30 and July 14 lows.
S&P 500 INDEX FUTURES PRICE CHART: 4-HOUR TIME FRAME (29 JUN TO 27 JUL 2020)
Chart created by @RichDvorakFX with TradingView
From a basic perspective, traders probably steered the inventory market increased owing to the prospect of recent fiscal stimulus from the US authorities. With lower than 100-days till the presidential election, republicans and democrats are at the moment debating one other coronavirus aid invoice whereas essential unemployment advantages supplied underneath earlier stimulus packages are set to run out on the finish of the month.
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If politicians and central bankers start to water down and take away the proverbial liquidity punch bowl from a frothy-looking market, not solely may this depart a whole bunch of companies and tens of millions of Individuals struggling with out the monetary help they desperately want, however it might additionally spoil the current S&P 500 rally juiced up on easy-money insurance policies. That stated, the Federal Reserve is scheduled to supply markets with its newest rate of interest resolution on Wednesday, July 29 at 18:00 GMT.
VIX INDEX PRICE CHART: DAILY TIME FRAME (19 JUL 2019 TO 27 JUL 2020)
Chart created by @RichDvorakFX with TradingView
It’s probably FOMC officers will depart benchmark charges unchanged close to zero, however there’s a likelihood for recent financial coverage steering conveyed in anticipated commentary from Fed Chair Powell. Language that hints at additional ‘easing off the gasoline’ with regard to explosive steadiness sheet growth might inflict ache on shares. Then again, said willingness ‘to do extra’ and a rosy tackle the US financial restoration might give the S&P 500 an added tailwind.
The financial calendar is affected by much more high-impact occasion danger all through the week. For example, a month-to-month client confidence report is due Tuesday, July 28 at 14:00 GMT whereas second quarter US GDP knowledge is anticipated later within the week on Thursday, July 30 at 12:30 GMT. That is along with the barrage of fairness earnings from high S&P 500 corporations on faucet all through the week.
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As such, the S&P 500 VIX Index, or fear-gauge, might function a attainable bellwether to the place shares head subsequent. The VIX Index sometimes holds a robust inverse relationship with S&P 500 worth motion. If there’s a sharp rise within the VIX ‘fear-gauge’ this week, it’d recommend a notable deterioration in dealer sentiment, and maybe correspond with an try by inventory market bears to steer the S&P 500 Index decrease.
— Written by Wealthy Dvorak, Analyst for DailyFX.com
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