The S&P 500 should now have the attention of all speculators who like to trade equity indices. The index has broken all-time highs and it is challenging the perspectives of optimists and skeptics as they search for reasons to consider their trading outlooks. After surpassing its mid-February highs and breaking the 3,400.0 level with a sustained flourish, the S&P 500 is now searching values never seen. And just in case you fell off the planet the past six months, the record high has taken place after the index crashed to a low of nearly 2200.0 in late March.
Since the lows of March the S&P 500 has gained approximately one/third of its total value. These are not ordinary times and the trading within the famed index highlights the magnitude of strength and money which has been invested – speculated – on since the world began to deal with coronavirus and its implications.
Skeptics certainly remain and question the high values of the S&P 500 with various topics. The notion that the Federal Reserve has served as a safety blanket for corporate America has certainly been heard. The belief that many financial assets are not capable of truly having a solid analysis has also been spoken about as people search for hard numbers to quantify. Skeptics may also say that the combination of Federal Reserve policy and the lack of real forward guidance regarding the financial outlooks for corporations have created a stock market which is dangerous and overbought. Admittedly, these points highlighted by skeptics have validity.
Significantly however is the point many of these same skeptics are actually buying into the S&P 500 because the trend has been supremely positive and they cannot afford to let their beliefs get in the way of their jobs to manage the money of their clients. There have been declines on the S&P 500; this has not been a one way street upwards. Speculators have to be careful about getting caught up in the belief they can catch a short term trade and profit without risks. Over exuberance can be deliver a costly penalty to traders who believe they do not have to use risk management.
Resistance at the 3,500.0 level is the next significant hurdle the S&P 500 must jump. Current values need to be watched carefully to see if they can sustain themselves without a significant reversal downwards. Programed trading rules the equity indices in the US and the technology doesn’t care about the feeling of individual traders. August has produced solid gains for the S&P 500, just like July and June did. The election for US President is drawing closer, but the event will not take place until November which still gives financial institutions the ability to put blinders on and act as if the outcome is not a concern now.
Buying the S&P 500 via a CFD in a trading platform is the logical choice. Momentum is clearly on the side of bullish behavior. Trying to wait for pullbacks from record highs may be the proper choice to participate in this market, but it may also leave you standing out in the cold if your position does not get filled and the market continues to traverse higher because you have been too cautious. Optimistic speculators and skeptics alike need to practice solid risk management after opening trading positions within the S&P 500 to make sure they do not find themselves on the wrong side of sudden momentum.
S&P 500 Outlook for September:
Speculative price range September: S&P 500 3,200.0 to 3,600.0
Support at 3,300.0 appears capable, but if broken the S&P 500 could drop to 3,200.0
Resistance at 3,500 is the next big psychological target, if broken higher traders may believe 3,600 is a viable target.
