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Will the S&P 500 Index Rally beyond 2,500?

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S&P 500 Index closed above 2,500

The S&P 500 Index (SPY) closed the week ending September 15 at 2,500.23, gaining 1.6% as compared to the previous week’s close. Risk appetite returned to the markets as fears about North Korea eased despite another missile launch over Japanese territory. Lower-than-expected US retail sales and industrial production data failed to dent investor confidence as reports about possible tax reforms from the US government boosted investor confidence.

Most of the sectors in the S&P 500 Index (IVW) closed with gains in the week ending September 15. Gains over 3% for the week were recorded in the telecom, energy (XLE), and financial (XLF) sectors. The utilities sector was the only sector to post losses last week.

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Speculators turned bullish on the S&P 500 Index

For the week ending September 15, large speculators of the S&P 500 (IVV) Index increased their net bullish positions to 31,770 as compared to 27,555 contracts in the previous week. This data was reported by the Commodity Futures Trading Commission (or CFTC) through their weekly Commitment of Traders report (or COT).

Will investors remain bullish on the S&P 500 Index this week?

Investor optimism is likely to remain high, aided by tax reform hopes. This week’s economic data releases include the US FOMC meeting on Tuesday and Wednesday where the Fed is expected to announce the balance sheet trimming program. The Fed Philly Index, along with the weekly jobless claims on Thursday, will likely give a better picture of the impact of Hurricane Harvey and Hurricane Irma on the labor markets. The index level of 2,500 is a psychological hurdle. Investors need to be cautious at such levels, but the positive momentum in US markets is likely to remain stable if the tax reform hopes stay alive.

In the next part of this series, we’ll analyze why the US dollar (USDU) rallied despite a weak August jobs report.

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