Analys från DailyFX
S&P 500 – Rare Oversold Reading, Search for Support Is On
What’s inside:
- The SP 500 day-to-day ups and downs make trading more favorable for the nimble day-trader
- Market becoming very oversold in short-term
- A move towards trend-line support in conjunction with oversold could present a nice trade from the long-side
The see-saw price action in the SP 500 (FXCM: SPX500) the past three days – big down, big up, big down – is making for good quick-flip conditions for the day-trading crowd as volatility finally emerges after a dull end of summer, but isn’t presenting a compelling set-up for the swing trader just yet.
In Tuesday’s commentary we noted: “If the SP starts to fade back towards yesterday’s low, we will want to pay attention to how it reacts to determine if it is a retest or likely to be another leg lower.”
If the market doesn’t get pep in its step very soon we look likely to head lower in the immediate future, with a full test of the Monday low at 2108 and then the Feb trend-line quickly comes into focus around the 2100 mark. (Note: Levels are CFD prices.)
Market very short-term oversold: The percentage of stocks in the SP 500 trading above the 10-day moving average dove to just under 8% yesterday, about as low of a reading as you will see. This type of oversold reading has tended to lead to bounces in the short-term. Looking back over the past five years the %above has only gone below 8% on fourteen occasions, of which 13 times the SP was trading higher five days later. Compelling. (It’s only one metric, but many of the indicators used to measure extremes are highly correlated.)
SP 500 Index w/%10-day
Support close at hand coupled with oversold conditions is reason for discomfort (poor risk/reward) in looking to establish a short position with a longer time-frame outside of a day. But should we see trend-line support met with the above described conditions in place, then we will soon have the makings for a potentially solid trade from the long-side. It’s possible we have already found support at the 6/8 peak, but price action is still weak enough at this time it looks as though another leg lower could develop into the trend-line first before seeing a tradeable low.
Hone your skills as a technical trader and check out one of several free trading guides designed for traders of all levels of experience, as well as “Traits of Successful Traders”.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinonFX.
If you would like to receive analysis directly to your inbox, sign up here.
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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