What goes down must come up. Yes, that is turning logic and gravity upside down, but global indices continue to show this is the case and the S&P 500 is a prime example of this thinking. The index has found additional momentum since late June and it seems to be slowly and surely building a progressive bullish trend that is putting it within striking distance of all-time highs. Yes, you can speculate against the S&P 500’s trend, you may even profit and take advantage of short term reversals downward. However, if you are currently betting on a long term downturn within the index and have been trying to short it for a solid duration, your trading account has likely taken a hit.
No, there are no sure things when trading and the stock markets are good place to learn this life lesson. However, US equities are not only attracting the money of financial institutions who likely feel there aren’t many other ‘safer’ places to risk their capital, indices seemingly also have the backing of US government policy via the Federal Reserve and Treasury which are making sure a philosophy of corporate welfare protects economic foundations. Right or wrong, the belief in current US government policy as a backstop for corporations has underpinned the sentiment that indices, including the S&P 500 are solid investments short and mid-term.
Important resistance is in sight for speculators and the juncture everyone is watching is the 3400.0 mark. The S&P 500 is not far below this target and the reason the value is vital is because it is approximately the record high for the index which was touched around the 20th of February, before concerns regarding coronavirus firmly took hold of the financial markets and sent many stock markets downward until late March.
Risk sentiment is the name of the game and the trend has undeniably been strong for US equity indices. While some speculators and investors question the values of global stock markets as economies struggle with the impact of coronavirus, a parallel universe has emerged in which many stocks not only remain strong, but challenge all-time highs. No, an upwards direction in the stock markets is not guaranteed and pullbacks in numerical values will definitely happen on occasion, but the overwhelming trend mid-term has proven that equity indices like the S&P 500 remain a place you want to be buying.
Speculators do need patience, they have to limit the amount of leverage they use in order to protect against downside reversals. Stop losses need to be used also to protect against devastating moves which could potentially happen and wipe out a trading account. However, if a trader is going to buy the S&P 500 with a limit order near current market values they cannot be faulted. An important aspect of trading is to also know what your goals are going into a trade. If a speculator believes record highs will be achieved, they will likely need to take a deep breath and be able to handle the gyrations of the marketplace which will certainly play out. Traders need to know when to take profit off the table and get out of positions too. Staying too long in a trade can frequently turn sure profits into losses, particularly if a desire for a positive reversal outweighs the emotional risk of watching a trade actually go negative. Cash in your winning positions folks.
Yes, the US is going into election season, but the actual vote is still three full months away. Financial institutions are certainly worried about the potential outcome of the elections, but this has not started to create any signs of distress in the S&P 500. Again, traders can look for short term reversal downwards and follow technical trends which may develop for a period of time. However, the outlook for the S&P 500 indicates it will have a higher value at the end of August compared to where it starts trading at the beginning of the month. The outlook for the S&P 500 remains bullish until further notice.
S&P 500 Outlook for August:
Speculative price range July: S&P 500 3,100.0 to 3,500.0
Support at 3,150.0 appears capable, but if broken the S&P 500 could falter to 3,100.0
Resistance at 3,300 is vital, if broken upwards the S&P 500 could target new highs and aim for 3500.0
