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S&P 500 in Muted Day of Trading; Eyeing Highs Above 3500

Dow Jones New York Stock Exchange
Dow Jones

An increase in stimulus bets is helping the S&P 500 index higher this Tuesday, but only just. The position of the S&P 500 is also being aided by an increase in Housing Starts and Building Permits in September.

Data from the US Census Bureau and the Department of Housing and Urban Development showed that housing starts rose 1.9% in September to a seasonally adjusted 1.42 million, which was slightly lower than the 1.46 million consensus number but higher than the 1.388 million registered in August.

The data indicates that the US housing market has hit a positive momentum heading into the 4th quarter of 2020. The focus of the markets as far as housing is concerned is to see more Americans owning their own homes as opposed to opting for rentals. After the global financial crisis, the housing market witnessed a shift from homeownership to rentals.

With the non-passage of the additional coronavirus relief package, the rental market is now under pressure as many Americans are facing eviction. The coronavirus-associated job losses and lockdowns have rendered tenants unable to pay for their rents.

The markets remain hopeful of an additional stimulus being passed, but the time to get this done before the elections has started to run out.
The S&P 500 is trading 0.69% higher at 3450.9.

Technical Outlook for S&P 500

The price picture for the two trading sessions held this week is that of a bullish harami pattern. An outside day bullish candle with a higher close than the harami’s day one candle is required for price to continue the ascent towards 3528.9. A break above this level sends the S&P 500 towards the 3588.1 all-time high, thus completing the price projection from the break of the inverse head and shoulders pattern.

On the flip side, failure to achieve the outside day candle or the formation of another candle with a lower low than the day 2 candle in the harami provokes further downside. This brings in 3393.5 into the picture. 3335.5 and 3282.2 are also potential downside targets.

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