Bottom line: SPX500 long term structure continues to firmly remain bearish against 3400 resistance. The indice has reversed lower from 3230/40 levels recently as bears seem to be back in control. A break below 3100 mark would confirm a major bearish reversal.

Fundamental Outlook:

NZDUSD hits 0.6585 highs yesterday before pulling back sharply lower. The currency exchange rate has hit the highest level since February 2020 but remains vulnerable for downside pressure. After the Fed’s dovish forward guidance yesterday, Reserve Bank of New Zealand (RBNZ) is also expected to adapt a similar approach. Further, the RBNZ may opt for a Negative Interest Rate Policy if required, which could add further pressure on the exchange rate.

USDJPY exchange rate has lost almost 300 pips from recent highs at 109.85. The currency clocked in to 106.90 lows today before pulling back above 107.00 mark. The anti-risk Japanese Yen has gained over the past sessions as risk sentiment turned lower. Global Markets are easing off for the 3^rd consecutive day as Dow Jones and SPX500 futures are down close to -1% as we write the article.

SPX500 futures are down for the 3^rd consecutive trading session leaving investors confused after the progressive rally since May 14, 2020. The underlying facts of a looming Global Recession, rising tensions between US-China, protests in the US over the in-humane killing of George Floyd and potential risk of another round of COVID-19 infections, cannot be over looked as of yet.

Technical Analysis:

SPX500 seems to be back in control of bears as the indice is down over 6% in the last 3 trading sessions, after reversing from 3230/40. A break below 3100 would confirm that trend has resumed lower and a meaningful lower high is in place. The next major move is lower towards 2200 and further.

SPX500 had earlier dropped from 3400 through 2200 in an impulse wave. The corrective wave has found resistance just above the fibonacci 0.786 retracement seen at 3140 levels. Price action is reversing sharply lower as futures trade close to 3145 at this moment.

Traders might be willing to initiate fresh short positions around current levels (3140/50), with protective stops above the 3400 mark and projected targets below 2200 levels respectively.

Prepared by

Harsh Japee, Technical Analyst.

SPX500 Chart

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