What’s inside:
- SP 500 regains key broken technicals, but…
- It doesn’t mean it’s in the all clear just yet for higher prices (current period looks familiar, though)
- Looking to support by way of May parallel and June high as a guide
Find out in our Q3 Forecast what’s driving the SP 500 this quarter.
In the forecast coming into this week, this is what we had to say: “That reversal [referring to 8/8] turned into a mini-rout on Thursday. The damage done was a break below the June high and lower parallel rising up from May. This keeps pressure on the market to try and regain a bullish posturing. It’s done so before (over and over in this ‘buy the dip’ market), but can it do it again – right now?” In a way, so far, we got our answer – yes. Dip-buyers showed up again and while victory for longs can’t be celebrated yet, the market did manage to regain the previously mentioned broken technicals.
We’re at a bit of a cross-road with the spike lower and rebound. The market could be resuming the uptrend after a quick sell-off as it has done so many times before, or in the process of putting in a lower high and roll over again.
With those two scenarios in mind, here is what to watch for. First-off, look to the recaptured May parallel and old June high as support should the market dip from here. If we see a break back below 2350 then odds increase significantly that a lower high is being put in and the market wants to break lower. But should the SP maintain above support then we’ll run with the notion the market wants to maintain a bid at the least, if not make a run on the 8/8 reversal-day intra-day record high. The period from early July to now looks very much like the period during April and May. Could we see a similar path once again? We’ll use the beforementioned support levels as our guide.
Yesterday, we saw some intra-day whipsaws following the release of the minutes from the July FOMC minutes, but net-net the market ended the day right where it was two hours earlier. Looking ahead, tomorrow brings U. of Michigan Confidence for August, potentially a market-mover, but look for it to have more of an impact on FX/rates than equities.
SP 500: Daily
See the Webinar Calendar for a full line-up of upcoming live events with DailyFX analysts.
—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.