- The S&P 500 Index jumped 3.1% in Monday’s trade. The index is less than 50 points short of the psychologically crucial 3,000 level. The 200-DMA (day moving average) also lies around the same level.
- Over the last four weeks, the index has faced strong resistance before the 3,000 price level and its 200-DMA.
S&P 500’s 200-DMA and 3,000 price level
On Monday, the S&P 500 (NYSEARCA:SPY) closed at 2,954, which is only about 1.5% short of the 3,000 level. The 200-DMA is 2,999. While the S&P 500 looks near to the 3,000 price level, the 200-DMA has been a strong resistance level. On April 29 and May 8, the index looked set to cross above the 200-DMA and reclaim the 3,000 price level. However, SPY faced strong resistance and couldn’t hold on to those price levels.
S&P 500 today
The S&P 500 futures point to a weak opening today after a strong session in Monday’s trade. The last time the index closed above the 3,000 price level was on March 5. The index might face resistance at the level today. That said, Asian markets were strong today after gains in US stock markets on Monday. Commodity prices have also bounced back amid optimism about economies reopening after weeks of shutdowns.
US stock markets: What’s driving the rally?
Most leading fund managers expect a crash in US stock markets. However, the S&P 500 is near 3,000 price levels and is down only 8.6% year-to-date. The massive liquidity infused by central banks globally and the fiscal stimulus helped prop up stock markets. Optimism about a possible vaccine for the virus and gradually reopening economies also helped.
US stock markets: Bulls versus bears
On a fundamental level, US stock markets might not be reflecting the massive economic damage caused by COVID-19. Currently, bulls have an upper hand. They would get another victory if the S&P 500 crosses its 200-DMA.
Traders see the price crossing above the 200-DMA as a bullish indicator. The phenomenon is called a “golden cross.” Can the S&P 500 cross the 200-DMA today? It seems unlikely looking at the futures but we can’t rule it out. Meanwhile, several fund managers are cautious about the US stock market’s valuation. Read US Stock Markets Are Overvalued, Chorus gets Louder to learn more.