Analys från DailyFX
S&P 500 on the Brink of a Breakdown
What’s inside:
- SP 500 closed below November trend-line on Thursday
- 2405 watched as a key price point, with a close below bringing in down-side momentum
- Global markets echoing similar risk-off sentiment
Find out where our analysts see global equity markets heading in our Q3 Quarterly Forecast.
On Wednesday, we discussed the precarious positioning of the SP 500 as it was bearing down on important support by way of the November trend-line and 6/29 sell-off day. We expressed the timing of a make-or-break as being a matter of days. We also noted that support is support until it isn’t. A break, though, could soon be in store – warranting an outright bearish outlook.
Yesterday, the market took a hit and closed below the November trend-line, further weakening the technical backdrop. The closing print was only about 2 handles away from the 6/29-day low. A close below 2405 would be our cue to look for further weakness.
There is a slope rising up from December which may act as support, but it’s not viewed as significant. We’ll have to see how price action responds should we see it tested before drawing a concrete conclusion as to how much weight to give it. The real level of interest doesn’t arrive until 2352, the swing-low in May. Not far below the May low lies an important trend-line running up from the February 2016 low. If down-side objectives are met, in the current market environment, it would be considered a relatively large drop off the high from over 2450; spooking investors and giving rise to volatility (a much-welcomed event for traders).
Should support hold and the SP forcefully move back higher and recapture the November trend-line we’ll have to reassess, and a period of chopping sideways (consolidation) may still be in progress. Looking around at a couple of other major global indices we follow closely – DAX FTSE 100 – we are seeing the potential for sizable drops to unfold. (For more, check out these recent pieces for the DAX FTSE.) The Nikkei has rolled over back beneath the 20k mark as well. A global risk-off event could be in the works…
SP 500: Daily
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—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.
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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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