Bottom line: SPX500 long term structure continues to remain bearish until prices stay below 3400 resistance. The counter trend rally might be close to terminating around 3050 levels as bears prepare to resume lower again.

Fundamental Outlook:

SPX500’s party continues for now as the indice closed higher at 3036 yesterday, a +1.5% rise. Futures are trading almost flat around 3040, as we write this article. Investors should remain cautious though, since Equity Markets may witness a significant drop over several mounting issues: COVID-19 effect on economic slowdown, escalating US-China tensions, fear of infections rising as economies re-open post lock down.

USDJPY may come under pressure again as the US Dollar continues to drop against its peers. The US Dollar Index had dropped to 98.72 before pulling back yesterday. USDJPY remains vulnerable to further drop towards 105.00 levels.

NZDUSD had rallied over +1.5% on Tuesday and managed to close high at 0.6228, along with its counterpart AUDUSD. Even though risk assets managed to rally, NZDUSD could not capitalize and remained flat, closing below 0.6200 mark. It would be interesting to see how the currency would react over Reserve Bank of New Zealand’s continued dovish forward guidance.

Technical Analysis:

SPX500 continues to print higher as each day passes. The indice has now reached 3036 (spot) mark and bears would remain poised to take control anytime soon. This could happen as early as today or tomorrow as most traders stand bullish. SPX500 could be preparing to resume lower towards 2200 in the next several weeks to come.

SPX500 had dropped earlier between 3400 and 2200 carving an impulse drop. A counter trend rally was expected to materialize, pushing the indice higher towards 2954 levels at least. The indice has just crossed the above fibonacci 0.618 retracement level by a margin and print fresh highs around 3040.

SPX500 still remains within strong resistance zone and a sharp reversal might remain possible. A break below 2800 would confirm that meaningful top is in place already. Traders might be preparing to initiate short positions against 3400, targeting below 2200. 

Prepared by

Harsh Japee, Technical Analyst.

SPX500 Chart

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