The SPDR S&P 500 ETF held steady on Tuesday as investors waited for the upcoming FOMC minutes. SPY rallied to a high of $400, which was the highest level since September 13. It has jumped by almost 15% from the lowest level this month. Other indices like the Dow Jones and Russell 2000 have also recovered.
FOMC minutes ahead
The SPDR S&P 500 ETF is one of the most popular funds in the world with over $375 billion worth of assets. It tracks the S&P 500, which follows the biggest publicly traded companies in the world. It competes with the iShares Core S&P 500 fund and Vanguard S&P 509 fund which have $301 billion and $748 billion in total assets.
The SPDR S&P 500 ETF has been in a strong recovery in the past few weeks as investors react to the possibility of a Fed pivot. Hopes of such pivot increased this month after the US published encouraging consumer inflation data. According to the statistics agency, the headline consumer inflation dropped from 8.3% in September to 7.7% in October.
It is unclear how a Fed pivot will be. Analysts expect that the bank will hike interest rates by 0.50% in December, down from the past four straight increases of 0.75%. It will also continue with its quantitative tightening process. A relatively dovish Fed is usually positive for the S&P 500 index.
The SPDR S&P 500 ETF has also rallied after the recent retail earnings. Giant American retailers like Walmart, Home Depot, and Lowe’s published strong results last week. This week, firms like Abercrombie & Fitch, Dick’s Sporting Goods, and Burlington Stores published strong results. Other firms that published results were Movado Group and Warner Music Group.
Analysts have mixed opinions about the current rally. In a note this week, analysts at Goldman Sachs said that the bear market will last fo a while. The key catalysts for a rebound will be lower interest rates and optimistic earnings growth. Similarly, Mike Wilson, the award-winning analyst from Morgan Stanley remains pessimistic about earnings.
SPDR S&P 500 ETF forecast
The SPDR S&P 500 ETF has been in a strong bullish trend in the past few weeks. On the 4H chart, it remains between the middle and upper lines of the Bollinger Bands indicator. The fund has also moved above the 50-day moving average and the important resistance level at $390. At the same time, the Stochastic Oscillator has moved above the neutral level.
Therefore, the index will likely continue soaring as buyers target the next key resistance level at $420. A drop below the support at $390 will invalidate the bullish view.