US Midterm Elections - After struggling for direction for most of the session, US equities pushed higher in late trading despite cautious sentiment ahead of high-impact events in the coming days. At the close of trading, the S&P 500 was up 0.96% to 3,807, supported by a strong rally in telecommunications and energy stocks. Meanwhile, the Nasdaq 100 jumped 1.11% to 10,977, but higher yields across the curve appeared to cap its gains. Looking ahead, all eyes will be on Tuesday's US Midterm Elections, where Democrats are expected to lose control of Congress, with recent polls suggesting Republicans could win majorities in the House of Representatives and possibly the Senate.
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S&P 500 Technical Analysis Ahead of US Midterm Elections



After the recent rebound, the S&P 500 today ahead of the US Midterm Elections has reclaimed the psychological 3,800 level and the 50-day simple moving average, a constructive development from a technical perspective. If buyers continue to push prices higher in the coming days, the next resistance to watch emerges around the 3,900 area. On further strength, the focus shifts to 4,000, the 38.2% Fibonacci retracement of the 2022 selloff. In the event of a pullback, support is located at 3,720, followed by 3,640.

S&P 500 Technical Chart Ahead of US Midterm Elections

Bagan, Deskripsi histogram dihasilkan secara otomatis

While a divided government could lead to political gridlock and hamper President Biden’s agenda for the remainder of his term, it may not necessarily be bad news for stocks, as the Fed could seek to offset the economically damaging gridlock with a less hawkish stance. As such, it would not be surprising if the shift in the balance of power in Washington sparked a bullish reaction on Wall Street. The calendar is bright on Wednesday, but Thursday brings the all-important economic release: the October US inflation report. The headline CPI is expected to have risen 0.6% mom, bringing the annual rate to 8.0% from 8.2% in September. Meanwhile, the core gauge is seen ticking up at 0.5% m/m and 6.5% y/y. For the mood to improve and risk appetite to rebound in a meaningful way, we need to see a convincing slowdown in price pressures. On the other hand, if the data surprises to the upside as in previous months, FOMC terminal rate expectations will drift higher, pushing up bond yields and creating a more hostile environment for equity markets. This scenario could trigger further declines for the S&P 500.

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STOCK MARKET PROSPECTS

  • S&P 500 starts the week on a positive note ahead of major risk events in the coming days
  • The US midterm elections will take centre stage on Tuesday, but the October US inflation report will steal the show on Thursday.
  • For risk appetite to recover in a meaningful way, CPI must show convincing signs of slowing.
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