Bottom line: SPX500 long term structure continues to remain bearish until prices stay below the 3400 mark. The indice is potentially into its last leg rally towards 3000/50 levels before it finds resistance again.

Fundamental Outlook:

SPX500 had managed to print yet another monthly high around 2980 yesterday, before closing at 2972. The indice managed to close the day higher by over +1.5% after opening gap up. The optimism over a potential COVID-19 drug invention (though it is far from reach) and hopes of US economic recovery as states continue to re-open, has stimulated risk sentiment this week.

NZDUSD managed to hit monthly highs at 0.6157 yesterday after Reserve Bank of New Zealand kept OCR unchanged to 0.25% in the monetary policy meet held last week. Though the RBNZ has ruled out possibilities of a Negative Interest Rates Policy in the near term, more stimulus would be required to overcome the COVID-19 effect on the economy. RBNZ is expected to maintain a dovish guidance over the next meet as well.

Technical Analysis:

SPX500 might be in control of bulls over the past few trading sessions as it hits fresh highs around 2980 yesterday, before pulling back. Believe it or not, the recent rally is a part of the counter trend that had begun since 2200 levels in March 2020. It is just a matter of time before we witness a meaningful lower top followed by a sharp bearish reversal.

SPX500 had dropped from 3400 through 2200 levels as an impulse wave. This confirms that the drop is incomplete and the indice needs to print below 2200 mark, going forward. Also note that the counter trend rally is still corrective indicating another impulse drop, going forward. Also note the fibonacci 0.618 resistance has already been tested, hence probabilities remain high for a bearish reaction.

Traders might be preparing to initiate fresh short positions around 3000/3050 mark, with protective stops above 3400 and projected targets below 2200 going forward.

Prepared by

Harsh Japee, Technical Analyst.

SPX500 Chart

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