Analys från DailyFX
SPX Technical Analysis: Testing Bottom-Side Support
– SPX Technical Strategy: Flat, conditional short setup identified.
– SPX is currently catching support off of the psychological 2k level, but there are numerous levels below to catch near-term price action.
– A ‘bigger picture’ short setup may be building, but for now, support is holding and traders should treat the SP as such: supported.
In our last article, we looked at a choppy SP 500 that didn’t present a clean trend on either side of the market. To be sure, the prior up-trend in the SP may be enough to invigorate traders to have a top-side bias when we’re in an obviously bias-free (ranging) market, but a heavy calendar of economic data in December combined with a lack of a clear technical setup was enough for many traders to take a back seat.
Since then, we’ve seen a choppy SP get even choppier. With prices first testing the lower-boundaries of support in the 2,000 neighborhood, only to bounce higher and then move right back. There are reasons for this thing to move higher and reasons for it to move lower but none of those mean much right now, because the SP is pretty in the same vicinity as where price action has been for the past month.
Now, this doesn’t preclude a ‘big picture’ or longer-term position in the market; it merely means that more chop may be to come in the interim, especially around a holiday-shortened week. In reference to that ‘bigger picture’ position is the potential for a long-term short position should the highs of 2,137 continue to hold. This is the 61.8% extension of the Financial Collapse move, and after a high was set at 2,137 earlier in the year, we’ve seen a series of ‘lower-highs’ come into the market as the Federal Reserve debated rate hikes for much of the year. Rate hikes are a pretty bearish thing for stocks, so when combined, there is rationale for a bearish SP position going into next year on both a fundamental and technical front. This longer-term view could help a trader construe near-term price action.
Should any of these major support levels become breached, traders can move down to an hourly or 4-hour chart to look for top-side wicks as resistance around old support. The 2,000 level could be extremely opportunistic for this approach, as could the bottom-side Fibonacci levels at 1,985 and 1,949. Traders can then target 1,905 (23.6% Fibonacci retracement), 1,850 (prior price action swing + psych level), and then 1,833.50 (prior low after China’s ‘Black Monday.’)
Created with Marketscope/Trading Station II; prepared by James Stanley
— Written by James Stanley, Analyst for DailyFX.com
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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
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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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