Analys från DailyFX
S&P 500 Bulls Undeterred by Hawkish Fed; Eyes on Slope Resistance
What’s inside:
- Hawkish FOMC only causes only minor intra-day volatility, market snaps back
- Recent breakout might continue, but history hasn’t been kind to chasers
- A pair of top-side trend-lines could be problematic, bring in next way of weakness
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Yesterday, the FOMC was clearly hawkish, and with that the US dollar ripped while U.S. equities tanked (at least momentarily). The dip in stocks wasn’t really much of a “tank” as the SP 500 fell only about 10 handles, it just felt like it in this low-volatility environment (VIX closed sub-10). Weakness was short-lived and met with buying no more than about 25-30 minutes after the Fed announcement, erasing all FOMC-induced losses and closing near the highs of the session.
Since breaking out to new record highs earlier this month it’s been a grind. It hasn’t been worth fighting from the short-side, but not all that fruitful for the longs either. The trading might not get much easier or ’exciting’ until we see another bout of weakness like we had during July and August. Weak markets equal higher volatility, thus more wiggle room for trading opportunities.
Looking at how the market has acted in recent years after notching new record highs we might not have to wait too long for another spat of volatility. The SP has had a propensity for punishing those who chased the market into record high territory (three occasions since May). It’s a ‘buy-the-dip’ market. Initial breakout buys may have worked, but the better entries have been when others were exiting into declines.
Where might the market stall and turn back lower? Not far ahead we have a couple of top-side trend-lines. The one line running over peaks back to March comes in around the 2515-mark, while the second one extending back to June isn’t until the 2525/30-area (depending upon timing of arrival). At those points we’ll pay especially close attention to price action and if it suggests we are in for another decline – even if it is only to be corrective in nature. A sharp rejection lower will be our cue. Short-term traders (intra-day to a few days) should at least benefit from this, and for those looking to ‘buy-the-dip’ another decent opportunity might present itself at a later time.
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SP 500: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
You can follow Paul on Twitter at @PaulRobinonFX.
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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