Bottom line: SPX500 has surpassed previous resistance around the 3400 levels. As the indice trades near all-time highs we remain cautious on initiating fresh long positions. It might be good to avoid getting into a potential bull trap.

 Fundamental Outlook:

NZDUSD had rallied over +1.0% and closed comfortable above the 0.6600 handle yesterday. The recent strength might be fueled by risk sentiment as Dow Jones, SPX500, NASDAQ and DAX managed to close higher again. It remains to be seen how markets react to the Jackson Hole Symposium starting today. The US Dollar Index might be setting up to gain over the next several weeks.

SPX500 futures climbed to fresh highs at 3486, closing above +1.0% yesterday. It might be anybody’s guess over a potential bearish reversal but the indices faces a major event risk. Investors could be closely following the Jackson Hole Symposium starting today. Any tone of pessimism by Fed Chair Jerome Powell might trigger a reversal across global indices.

USDJPY had print highs around 106.50 yesterday before pulling back and managed to close just below 106.00. The exchange rate might remain volatile amid news of resignation from Prime Minister Abe due to health concerns. The Jackson Hole event might further add to the volatility.

Technical Analysis:

SPX500 defies resistance and clears above the 3400 mark. Bulls have managed to print fresh highs at 3485 yesterday and it could be anybody’s guess on the next resistance. Having said that, traders might be warned of initiating fresh longs to avoid a potential bull trap.

SPX500 structure changes after breaking above 3400 mark as focus is back on the rally between March 23 lows around 2200 mark and 3485 respectively. If a new trend has resumed, which seems unlikely though, it might be worth to wait for a corrective pullback towards 2800 levels at least.

Also note that weekly RSI is indicting a strong bearish divergence as SPX500 prints fresh highs around 3485. High probability remains for a bearish reversal from current price action (3478), and a break below 3200 mark would certainly confirm. Most traders might be inclined to remain flat for now and prepare for a bearish turn.

Prepared by

Harsh Japee, Technical Analyst.

SPX500 Chart

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