The U.S. stock market has seen gains over the past few weeks, driven largely by the S&P 500 index. Since hitting a trough on March 23, the index has risen 26.1%, and some investors are wondering if a turnaround could be in the making.
However, investment decisions should not be made on a whim. It’s important to evaluate the data and assess both the short-term and long-term prospects of any investment. In this article, we’ll look at three charts that investors should consider when assessing the prospects of the S&P 500 Index.
The first chart to consider is the weekly price chart of the S&P 500. The most recent week ended with the index closing at 2,918.87, its highest close since the market sell-off began in March. This chart shows that the S&P 500 is trending in an overall upward direction, and has been since the bottom of the index’s decline. While the index could still see some near-term pullbacks, the overall trend suggests that it could be on the path to recovery.
The second chart to consider is the relative strength index (RSI) of the S&P 500. This chart shows that the RSI value has been consistently increasing over the past few months, and is currently hovering around the 70-mark. This indicates that the index is overbought, which could mean that the index is due for a pullback.
The third chart to consider is the price-to-earnings (P/E) ratio of the S&P 500. The P/E ratio is a measure of how expensive the index’s components are relative to their expected earnings. The most recent reading of the index’s P/E ratio is 27.37, which is below the long-term average of 16.90. This suggests that the index’s components are currently trading at relatively cheap prices, making them attractive investments for buyers.
In summary, a quick glance at the three charts mentioned above paints a bullish outlook for the S&P 500. The weekly price chart shows that the index is trending upwards, the RSI chart indicates that the index is reaching overbought levels, and the P/E chart is indicating that the S&P 500’s components are currently trading at relatively cheap prices. With this in mind, investors may want to consider investing in the S&P 500 index as part of a diversified portfolio.
