Analys från DailyFX
S&P 500 Pulls Back to Support and Holds; Rip to New Highs or Consolidation Next?
What’s inside:
- SP 500 holds eyed support levels, turns higher
- This keeps the trend pointed higher as long as support holds
- How the market comes out of a low will help guide us towards whether to expect a rip to new highs or a period of consolidation
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The pullback off the highs in the SP 500 has been a gradual process, with yesterday demonstrating characteristics of a short-term capitulation bottom. It wasn’t anything earth-shattering, but the ‘dribble’ lower over the past week ended in a relatively sharp drop and reverse in the afternoon session, suggesting the worst is over for now. The daily low came very near horizontal support from the end of February and a retest of the Feb ‘16 trend-line we have been working with the past few months. Also, very nearby is the trend-line running up from the November low. The market didn’t quite reach that point, but it may touch off on it at some point soon. Nevertheless, the stop and reverse from other noted support levels should be enough to keep a floor in for now. A break below yesterday’s low and the November trend-line would of course change this outlook.
How the market comes out of yesterday’s low should help provide us with insight as to whether we will see a strong resumption of the uptrend or entering a period of consolidation. A strong initial surge would suggest the former. However, a period of horizontal work would be a positive development for setting up a rally later on. For now, the bias is higher to side-ways at the worst, with clear support levels/lines in place to operate off of.
Heads up next week: FOMC rate decision on Wednesday could spark volatility. The market has already priced in a 25-bps hike, so it’s likely that if volatility is to stem from the meeting, barring a 0 or 50 bps move, it will come from the Fed’s statement and forward indications. A big NFP miss today may cast a shadow of doubt prior, but not looking like the most likely scenario at this time. (See the economic calendar for details.)
SP 500: Daily
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—Written by Paul Robinson, Market Analyst
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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
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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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