S&P 500 Forecast: Futures rise as Nvidia stock rebounds

After the post-election rally fuelled by Trump’s win, the S&P 500 looked like it had entered a consolidation phase, with the index continually coming under pressure after repeated recovery attempts so far this week. However, index futures started to push higher around one hour after the European open, and now find themselves at fresh highs on the week. Incidentally, NVidia shares also recovered in pre-market trading. European indices also bounced off their earlier lows but were more subdued. While global markets outside the US face pressure from trade concerns and expectations that the Fed will slowdown policy easing, the S&P has retained much of its gains. Bond and FX markets echo this divergence, with the dollar strengthening and Treasury prices rising as geopolitical tensions, particularly regarding the Russia-Ukraine, add to global uncertainty. However, while the market appears bullish right now, the S&P 500 forecast is far from certain, especially with a lack of fresh bullish catalysts to consider. Could profit-taking negatively impact the market soon?

Nvidia's shares recover

On a micro level, Nvidia’s performance is worth noting. Despite delivering another record-breaking quarter that beat earnings and revenue estimates, its shares fell over 3% in after-market trading. Why? Revenue growth projections disappointed, marking the weakest increase in seven quarters, compounded by concerns over production levels. However, as has been the case multiple times in the past, the dip was bought in pre-market and the stock is set to open in the green. Given Nvidia’s prominence, its trajectory could influence tech-heavy indices, and thus impacting the S&P 500 forecast. This makes it a key stock to monitor today.

Technical S&P 500 forecast: Key levels to watch

From a technical standpoint, the S&P 500 remains in an uptrend of higher highs and higher lows. This structure favours the bulls for now, but the lack of sustained follow-through in recent sessions suggests that the market is approaching a critical juncture.

Key support lies at 5857, a former resistance level that turned into support following the election surge. Recent price action has tested this zone without decisive breakdowns, but the lack of significant upside momentum does raise questions as to whether we will see new highs or a correction first. A breach of this level could pave the way for a move toward the next support zone at 5772-5793, which was pivotal pre-election. Further declines might target July highs at 5670, a scenario that would challenge the current bullish structure.

On the flip side, immediate resistance at 5938 remains in focus. Clearing this level could open the path to 5965 and potentially the psychological 6000 mark. Beyond that, the all-time high comes in at 6027.

Long-term overbought conditions need to be addressed

It’s worth noting that the S&P 500 continues to trade in overbought territory on longer time frames, such as the monthly chart, where the Relative Strength Index (RSI) hovers above 70. While this doesn’t automatically signal a sell, it does warrant caution. Historical patterns show that extended overbought conditions can persist, but they often precede significant corrections, as seen in 2022, for example.

On the monthly S&P 500 chart, the 5670-5695 zone marks a massive area. Both the July and October lower come into play there, making it the next line of defence on the higher time frames. This pivotal area will likely dictate whether the S&P 500 can stabilise or if a deeper correction lies ahead, should we get there.

So, the S&P 500 forecast and technical trajectory depends on whether it can hold some of the critical support zones mentioned. While the longer-term uptrend remains intact, overbought conditions and waning momentum suggest that caution is warranted. Keep an eye on Nvidia and broader macro factors, as these could drive the next big market move.

Source for all charts used in this article: TradingView.com

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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