US index futures turned lower after a mixed performance earlier, when the indices were looking to retain much of the modest gains from the previous session. However, an 8% drop in Walmart shares in response to its earnings caused a bit of a dip in futures. UK’s FTSE also edged further lower, while mainland European indices, which staged a recovery following a sharp decline the day before that was triggered by President Trump’s latest tariff threats and his apparent retreat from supporting Ukraine and its European allies, managed to hold much of their prior gains. With no significant fundamental catalysts at play, markets continue to find willing buyers on the dips, allowing equities to edge higher. However, a correction may soon be necessary to restore a more attractive valuation for US stocks. While there are no overt warning signs just yet, it pays to be alert to signals that would put the S&P 500 forecast on a downward trajectory in the short-term.

Trump, Ukraine and tariffs remain in focus

Following yesterday’s sharp decline in European equities, markets have stabilised somewhat. Trump’s proposed tariffs of up to 25% on automobiles, semiconductors, and pharmaceuticals have contributed to a sense of unease. His rhetoric towards Ukraine President Zelenskyy has only added to the uncertainty, prompting investors to seek safety in gold, which has surged to a fresh record, surpassing the $2,950 mark.

Despite these challenges, US markets have proven remarkably resilient. On one hand, Trump’s latest pronouncements have intensified market jitters, particularly given the absence of Ukrainian and European officials from recent US-Russia negotiations. On the other, his suggestion of a possible new trade deal with China has injected a measure of optimism into the equation.

Technical S&P 500 Forecast: Key levels and trade ideas

Source: TradingView.com

The S&P 500 remains in bullish territory, as reflected in the persistence of higher highs, rising moving averages, and limited pullbacks, among other technical factors all of which pointing to a robust uptrend. That being said, an eventual reversal cannot be ruled out. For example, should a false breakout materialise, the bullish bias could face a genuine challenge. Until then, however, dip-buying remains the prevailing strategy.

With the index trading near record highs, clear resistance levels are difficult to identify. The December peak of 6100 has been repeatedly tested and was decisively breached last week. Should this level hold as support, the next upside target is likely to be the 127.2% Fibonacci extension of the December pullback, positioned around 6190.

On the downside, immediate support below the December high is located near 6075, aligning with last Wednesday’s hammer candle high and the 21-day exponential moving average (EMA). A breach of this level could see the index testing the short-term bullish trendline, which may prompt dip-buyers to intervene once more.

However, should the S&P 500 slip below the psychologically significant 6000 mark, bullish momentum could begin to wane. Such a development might increase volatility and trigger further technical selling, potentially steering the index towards the next notable support zone around 5880, where the long-term trendline provides additional reinforcement.

Looking Ahead: Key Economic Data

Central banks remain cautious, as inflation risks could limit the scope for interest rate reductions—a sentiment echoed earlier this week by the Reserve Bank of Australia. The latest minutes from the Federal Reserve reaffirmed the status quo, with policymakers showing little inclination to alter their current approach.

Market attention will soon turn to the forthcoming release of the Core PCE Price Index on 28th February, widely regarded as the Fed’s preferred measure of inflation. Last week’s CPI and PPI reports exceeded expectations, though the dollar’s muted response suggested that optimism surrounding tariffs outweighed inflationary concerns. Given the falls in healthcare and insurance costs as per the PPI report, as well as a reduction in airline fares, Core PCE is anticipated to moderate to 2.6% from the previous estimate of 2.8%. Alongside this, the second estimate of US Q4 GDP will also be published. Until then, other macroeconomic data releases are unlikely to have a significant bearing on the S&P 500 forecast or overall market sentiment.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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