SPX Spotlight - Thursday, Jan 2, 2025: New Year, Same Struggles
The S&P 500 kicked off 2025 on a sour note, extending its losing streak to five consecutive sessions.
Introduction
The S&P 500 kicked off 2025 on a sour note, extending its losing streak to five consecutive sessions. Despite an early rally attempt, the index succumbed to selling pressure, closing at 5,868.55, down 0.2% for the day. Here's a breakdown of the technical and economic forces driving today's move.
Market Drivers and Economic Reports
The market's decline came despite a positive jobs report, which showed fewer U.S. workers applying for unemployment benefits than expected.
This data suggests a resilient labor market, potentially complicating the Federal Reserve's plans for interest rate cuts in 2025. The strong employment figures indicate continued economic strength, which could lead to sustained inflationary pressures.
The energy sector provided some support to the market as oil prices rose. Conversely, Tesla's weak delivery numbers weighed on the market, with the company's stock declining by 6.1%. This highlights the ongoing influence of individual high-profile stocks on overall market performance.
The Conference Board has revised its economic growth projections, now expecting the U.S. economy to expand at a pace of 2.7% year-over-year in 2024 and 2.0% in 2025. These growth forecasts, while positive, suggest a moderation in economic activity that could impact corporate earnings and market performance.
Technical Analysis
Recap
SPX swung high towards the resistance and low towards liquidity zone hitting both our upper and lower bound. The rejection at top near resistance doesn’t look promising for a bull case.
Bull Case
We did get a bounce from 5,850 level as discussed in previous article. The next level to reach could be 5,905 level. We can still chop between Pivotal level and Liquidity Zone testing highs or going lower.
Bear Case
If we give up the liquidity zone, we could end up gap filling and the market could drop 50-60 points from yesterday’s low.
Market Sentiment and Key Indicators
We hugged the lower trendline for the entire trading session. Looked like we have a breakout but it was a false one, swinging right back into the trendline and closing out weak.
A retest or a break of 17 would help us better understand where will the markets be heading tomorrow. Level of 17 coincides with 50 EMA and therefore makes a key level for unlocking tomorrow’s play.
Key Takeaways & What’s Next
5,870-5,850 level still remains a key area for the market to grab liquidity to move up or give up those levels and head towards a gap fill.
We have couple of reports coming out tomorrow morning:
ISM Manufacturing PMI for December 2024.
FOMC Barkin speaks - low impact to the market but worth taking notes.
Atlanta Fed GDPNow report for Q4 2024.
Closing Thoughts
We don’t have any strong catalyst for the month of January for the markets to make strong move in either direction. Earning seasons don’t start until end of January, which is expected to bring some volatility to the markets.
Comment your thoughts below on what to expect tomorrow.