Analys från DailyFX
S&P 500: New Record Highs, Another Head Fake?
What’s inside:
- Big NFP print pushes the SP 500 back above trading range
- Breakout isn’t all that exciting as isn’t the trading environment, either
- In capital preservation mode until better price action, but fresh breakout could turn out to be another failure
Prior to Friday’s much better than expected NFP figure (+255k vs. 180k expected), the SP 500 began trading from inside the recent range it first broke above, then below, only to finally break back above again following the big jobs print.
The narrow range prior to the two false breakouts (maybe a 3rd on its way?) was historically tight, and tight ranges are known for false breaks. We recognized the first false breakout (higher on 8/1), but then hung onto the break lower as the ‘real’ break based on factors which supported a decline. That turned out to be a wrong conclusion, obviously, as we are now treading back into record territory.
It is a tough environment out there right now. It’s August, and without a catalyst to spur volatility, a low-volume trading environment where there are seemingly no concerns can be tough to navigate.
Do we trust this breakout? No. But, just because we aren’t jumping up and down for joy over the breakout doesn’t mean we are bearish either. It’s tough to be bearish with nothing substantial in the way of resistance and price action off of resistance which suggests we should be. There is a top-side trend-line running back to the July 14 high which the SP is trading off of now that could put a lid on the market. Above there, we then have to look to the psychological level of 2200. A break below the 2174/78 zone will confirm we have another head fake on our hands.
We still believe the markets tendency to trade back below the old record high (2137) not long (within weeks) after moving to new highs, will take hold. But, again, sans a reason for sellers to sell, the market may stay levitated for the foreseeable future as we move through the dog days of summer. However, should we see a sharp turn lower accompanied by heavy selling pressure, then we may be inclined to take a crack from the short-side.
Until price action becomes clearer, though, we will reserve ourselves and stay in capital preservation mode.
Find out what separates winning traders from losing traders in our trading guide, ‘Traits of Successful Traders’.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX.
You contact him via email at probinson@fxcm.com with questions or comments.
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.
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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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