What the S&P 500 Can Tell Us About Markets

What dictates movements in the S&P 500 and how does this explain broader market trends?

This article was written by Adinah Brown from Leverate.

The S&P 500 is a great analyzer, which uses a cross-sectional approach. Initially, when looking at it, the general assumption would be a shaky start for the US economy. Since the election of US President Donald Trump, the trends are working way past the resistance points and have reached new highs over the last few months.

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Politics often serves as a deal breaker for a lot of decisions related to investing, but the reality is that major indices in the US market continue doing business as usual. The S&P index has been charted, both between 2003 and 2004, and then again in 2010 when prices plunged past the resistance line. Yet after a painstakingly slow recovery after the GFC, the S&P gradually increased its price index over time, becoming as strong as ever.

Now, in the year 2017, the bad press and continuous trumping of President Trump may have led the industry to just focus on increasing market value, which would in turn further economic activities and help the economy get ahead of the improving global market. Going back to the charting analysis, it is best to say that long-term investing in the stock market, particularly stocks included in S&P, would mean long-term benefits, since it is acclimating to a pattern of continuously reaching and setting new record highs.

The main player among the S&P composite is the energy group, which consistently shows a high return per year, as compared to bare percentages for other sectors. The financial sector and consumer are coming in next in June. While telecommunications is not looking that well in the pie that forms the whole S&P, overall S&P is looking great in the long run.

Impact of Global Markets

The analysis would not be complete without the consideration of how the global market reacts and how the US market behaves. Currently, global markets are doing well, surpassing the US market on the lead. With proper historical charting and comparison against the trend with the global market, money is solely flowing in the US territory. Multiple breakouts are happening across the global market, thus lessening the stronghold of the US market against global competitiveness and trade.

To further understand the ins and outs of trading, analyzing the S&P 500 is like dealing with chance, but with a careful understanding of how the patterns form. Every tick matters within an hour during day trading, or a weekly decision to change-up investment portfolio mix to maximize long-term return. With a lot of techniques and computations available, self-learning tools can be found on the internet, like applying the Fibonacci sequence and understanding how pullback, breakdown and breakouts work, trade analysis has the means to be part of any trading plan.

Generally, S&P 500 is a mixed bag of long term and short-term risk in investing. Day trading could show a chart where both the resistance and support levels are indicated, enabling traders to make more advanced decisions for the coming investment period. Risk is inherent in every investment and this index is no exception. Knowing the investment mix you would trade is better than knowing if a certain type of investment would work out with the pattern S&P is making.

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