- The S&P 500 Index dropped to its lowest level since November last year.
- The Federal Reserve will deliver its interest rate decision later this week.
- Traders will focus on the ongoing US-Iran war.
The S&P 500 Index, SPY, and the VOO ETF have pulled back over the past few weeks, mirroring the performance of other US indices such as the Nasdaq 100 and the Dow Jones. The blue-chip index dropped to $6,632, its lowest level since November last year. This article explores what to expect this week.
S&P 500 Index, SPY, and VOO ETFs Have Major Catalysts This Week
American stocks will have several major catalysts this week, with the most important being the ongoing Iran war, which has pushed crude oil prices, fertilizer, and shipping costs higher.
The US and Iran have both maintained their rhetoric, with analysts expecting that the war has more weeks or months to go. For one, while Trump may want to declare victory, it is unclear whether Israel will accept it. Iran also wants a long war that will push crude oil prices higher, a move that will punish the US and Israel and prevent further attacks.
The other catalyst for the S&P 500 Index, VOO, and SPY will be the upcoming Federal Reserve interest rate decision, scheduled for Wednesday this week.
Economists expect the Federal Reserve will leave interest rates unchanged between 3.50% and 3.75% in this meeting. A Polymarket poll has a 100% odd that the bank will not cut rates in this meeting and a 94% chance that it will not cut in April.
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Therefore, the main headline, the Federal Reserve interest rate decision, will not affect the S&P 500 Index. Instead, traders will focus on the accompanying statement and Jerome Powell’s press conference, which will provide more information on what to expect as the economy enters a stagflationary period. Stagflation is characterized by high inflation and slowing economic growth.
While the earnings season has ended, some key companies will publish their financial results this week. Micron will be the most important, as it has become one of the largest companies in the US, with a market capitalization of over $480 billion.
Its results on Wednesday will provide more color on the state of the technology sector, where it is a big name in the memory chip industry, which is going through a major weakening. The other key companies releasing earnings this week are Lululemon, Accenture, Williams-Sonoma, and FedEx.
The private credit industry will also be in the spotlight this week as investors watch the developments after the recent turmoil that has pushed most stocks like Blue Owl, Blackstone, Ares, and KKR much lower amid substantial redemptions.
S&P 500 Index Prediction: Technical Analysis
The daily timeframe chart shows that the S&P 500 Index has slumped in the past few weeks, moving from a high of $7,017 in February to the current $6,632. It has dropped below the 50-day Exponential Moving Average (EMA).
The Average Directional Index (ADX) has jumped to 26, its highest level since October 20th last year, a sign that the downtrend is gaining momentum. Also, the Relative Strength Index (RSI) has continued to move downward and is nearing the oversold level of 30.
Therefore, the S&P 500 Index will likely continue falling as sellers target the next key support level at $6,500, the 23.6% Fibonacci Retracement level. A move below that level will signal more downside, potentially to the 38.2% retracement at $6,185, down 6.78% from the current level. Such a move will trigger a correction, which occurs when an asset drops by 10% from a local top.
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