S&P 500 analysis as the fear and greed index slips to 29

The S&P 500 index made a strong comeback on Thursday as investors bought the dip and after a consortium of big banks rushed to save First Republic Bank (FRC). The index rose to a high of $3,960, the highest level since March 9 of this year. It has jumped by ~3.82% from its lowest point this week. 

Fear and greed index in the red

The S&P index (SPX) and the SPY ETF jumped on Thursday as the financial sector improved. In the US, banks like Goldman Sachs, JP Morgan, and Bank of America deposited $30 billion of cash in First Republic Bank. Analysts believe that these deposits will provide a lifeline for a regional bank that has seen some outflows. Bill Ackman, the billionaire investor, is not convinced.

And in Switzerland, the Swiss National Bank (SNB) announced a rescue package for Credit Suisse. The embattled bank now has access to over $50 billion as it implements its biggest turnaround on record. All these factors led to a major comeback in bank stocks. Data compiled by Koyfin shows that financials were the third-best performance in the index. 

The other top performers in the S&P 500 index were technology, communications, consumer discretionary, and industrials. Healthcare, utilities, and consumer staples sectors were also in the green. The main laggard was the real estate sector.

Meanwhile, the fear and greed index has moved to the fear area of 29. A month ago, the index was at the greed zone of 65. Earlier this week, the index was at the extreme fear area of 25 as the banking crisis continued. The stock price breadth, put and call options, safe haven demand, and junk bond demand have all moved to the extreme fear level.

S&P 500 index forecast

S&P 500 chart by TradingView

The S&P 500 index rose to a high of $4,195 on February 2 this year. Since then, the index has been in a downward trend, which saw it reach a low of $3,813 this week. This price is a few points above the year-to-date low of $3,770. It has moved slightly below the 20-day volume-weighted moving average (VWMA). 

The index has formed a descending channel that is shown in yellow and is slightly below its upper side. Therefore, the S&P 500 index will likely resume the bearish trend in the coming days. If this happens, the key level to watch will be this week’s low of $3,806.