Analys från DailyFX
US Indices: S&P 500/Dow Turn From Resistance, Hourly Chart in View
What’s Inside:
- Multi-month trend structure negative, but room to run to resistance, however…
- Looking for a pullback in the SP 500 towards support
- Broader bullish back-drop makes this a ’hit-and-run’ situation
Market short-term overbought bodes well intermediate-term
Last week we discussed how breadth and price momentum in the market had become pushed to extremes which were considered overbought, but the market didn’t react negatively to those conditions. Instead, overbought became more overbought. This was a sign of changing character, marking an appetite for stocks not seen since in quite some time. This doesn’t provide an ‘all-is-clear’ signal to buy stocks with reckless abandonment, but the persistent short-term upward pressure coming from a multi-month low does bode well when looking out over the intermediate-term.
However, a pullback is in order at this time
The SP 500 and Dow both ran right smack-dab into the middle of major resistance on Friday and struggled. The 2000 area in the SP has acted as support and resistance on numerous occasions in the past. The resistance area of comparison in the Dow exists surrounding the 17000 level.
Shorts favored at the moment, but edge will quickly disappear
From a broader standpoint the market is at critical resistance and overbought, setting up the stage for a minor pullback at the least. At the time of this writing, heading into the North American session, the SP 500 futures (CFD) are breaking down out of a small rising channel on the hourly chart. The turn lower from resistance and break of a small rising technical formation provide underpinnings for an early week pullback. The target in the short-term is the rising trend-line off the 2/11 low and 1970 area. We don’t have a lot of interest at this time in overstaying our welcome from the short-side given the overall positive developments in place. So, this will be a ’hit-in-run’ type of situation from the sell-side.
SP 500 Hourly/Daily
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter @PaulRobinsonFX, or email him directly at probinson@fxcm.com with any questions, comments, or concerns.
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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