The S&P 500 edged higher for a fourth straight day and hit a session high around 2,400 points, a level that could become technical resistance moving forward. Its increase on Tuesday after the release of President Donald Trump’s budget plan but gains were tempered by declines in discretionary stocks amid weakness in auto-parts companies.
Trump asked lawmakers on Tuesday to cut $3.6 trillion in government spending with the aim of balancing the budget over the next decade. The spending cut targets at healthcare and food assistance programs for the poor in support of infrastructure and military spending, helping close budget deficits while also offsetting the revenue lost by cutting tax rates.
The biggest saving by this cut would be mainly from cuts to the Medicaid healthcare program for the poor, which are embedded in a Republican healthcare bill passed by the House of Representatives. However, it is expected that the proposal is unlikely to be approved in its current form as it radically cuts assistance to lower-income Americans.
Some new spending in Trump’s plan for fiscal year 2018, which starts in October. The Pentagon would get a spending hike which would be a $1.6 billion down payment to begin building a wall along the border with Mexico, a central promise of Trump’s presidential campaign.
Evidence this week is stacking up in support of economic growth after reports showed a high PMI reading, which is set to above 50 released on Tuesday, representing expansion of the manufacturing sector.
Additionally, housing recovery in U.S. is intact in spite of the drop in new home sales. New single-family home sales tumbled from near a 9-1/2-year high in April, but the housing recovery likely remains intact amid a tightening labor market.
The Commerce Department said on Tuesday new home sales declined 11.4 percent to a seasonally adjusted annual rate of 569,00 units last month, with sales in the West region plunging to their lowest level in nearly 1-1/2 years.
Technically, S&P 500 remains in an upward trend while it traded at 2396.4, a slight decline as of 2:10 p.m. in Sydney. It’s still trading in bullish market, seen from high reading of the Relative Strength Index (RSI) and increased MACD while risk is rising as the slowdown in their current momentum.
Since S&P 500 topped 2,400 points a few times during the session, a key resistance of record highs right above its current position brings a great pressure to its moving forward. If it failed to break to the current level, attentions on a potential reversal may increase selling pressure to trigger its slump in the future.
Chart 1: SPX500USD Daily
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