Analys från DailyFX
S&P 500: Confluence of Technical Events Bolsters Case for the Bears
What’s inside:
- Short-term technical events led to larger weekly reversal bar
- Weekly rejection occured at major long-term resistance
- Short-term support and resistance outlined
Last week the market started out on a positive note, but then risk sentiment turned south the final two days to conclude the week. We made note of very short-term technical events which suggested this could happen, but now these developments are pointing to an even larger move lower to take hold.
The intra-week rise and fall resulted in a bearish weekly reversal bar, and not only does the bar, in of itself, point to lower prices, but the fact it formed at a very important area of resistance over 2100 makes its presence even more significant.
Adding to the bears’ case is the divergence between U.S. indices, poor posturing of the Nasdaq 100, waning market health, and general deterioration in global risk trends. (For more details on these broader developments, check out these two recent pieces of commentary regarding – market divergences and the Nasdaq 100.)
The break of the wedge pattern and 5/19 trend-line on Thursday and subsequent bounce led to the formation and triggering of a short-term head-and-shoulders pattern on Friday. The SP moved below the measured move target at ~2095 to under 2090. But this was a derived target based on the height of the formation, not an actual level of support; true support isn’t until 2085, a solid level with multiple inflection points to prove its validity.
Important short-term levels to watch: Support at 2085 (nearing it at the time of this writing) and then 2072ish. Resistance is in the 2105/08 vicinity. We may not see immediate follow-through on the weekly reversal bar, but should see lower prices when looking out over the next 1-3 weeks.
SP 500 Daily (Weekly)
2-hr
Head’s up – tomorrow begins the two-day FOMC meeting, with the Fed to release its decision on rates and policy statement on Wednesday at 18:00 GMT time. There are zero expectations for a rate hike, so it will be all about the tone of the Fed and expectations of the central bank’s anticipated path of rates.
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX, and/or email him at probinson@fxcm.com.
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
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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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