The US stock market has recently experienced a surge, with the S&P 500 index reaching a record high of 5,325 points and the DJIA index touching 40,000 points. This uptrend has been fueled by the unexpectedly low US inflation figures released earlier, bringing optimism to investors. Inflation has been a major factor affecting market volatility in recent times, so its stabilization is a positive development. The latest April CPI increase was lower than expected at just 0.3% month-on-month, indicating a potential return to a downward inflation trajectory. Year-on-year, the CPI rose by 3.4% in April, slightly lower than the 3.5% increase seen in March. This deceleration in inflation is encouraging for investors, especially after inflation peaked at 9.1% in June 2022.
The April inflation report marked the first decline in year-on-year inflation since January 2024, leading to hopes that the Federal Reserve might soon ease monetary conditions. The technical analysis of the S&P 500 index shows a consolidation range forming around the 5188.0 level, with a possibility of an upward breakout that could extend the fifth wave to 5363.0. A downward breakout could lead to a range expansion to 5250.5. The market is currently developing the fifth wave of growth without significant correction, but a sharp decline along the trend to 4735.0 could occur at any moment. The MACD indicator supports this scenario, with its signal line at the maximums and pointing downwards.
On the H1 chart, the upward move to 5315.5 has been completed, with a consolidation range forming around this level. A potential downward impulse to 5296.0 has been fulfilled. A growth link to 5315.5 (testing from below) is expected, but a downward breakout from the range could lead to a continuation of the decrease wave to 5250.5. The Stochastic oscillator also supports this scenario, with the signal line above 20 and expected to rise to 80, indicating a potential for continued growth.
Overall, the current state of the US stock market reflects a period of euphoria among investors, driven by the record highs reached by key indices and the positive outlook on inflation. The recent stabilization of inflation, along with the hope for easing monetary conditions by the Federal Reserve, has contributed to this optimism. However, technical analysis of the S&P 500 index suggests a cautious approach, as there is a possibility of both upward and downward breakouts in the near future. Investors should closely monitor market trends and indicators to make informed decisions during this period of market volatility.
