Bottom line: SPX500 medium to long term structure might be turning bearish against 3600 levels. The indice had earlier dropped through 3300 mark, breaking below immediate support at 3350 levels. Bears might remain poised to stay in control from here.

 Fundamental Outlook:

NZDUSD had managed to push higher towards 0.6759 levels before finding renewed selling pressure. The exchange rate has dropped below 0.6700 as we prepare to publish and might remain under pressure. NZDUSD Q2 GDP has shrunk to -12.4%, which restrict pushing through 0.6790 highs over the next few weeks. Watch out for RBNZ monetary policy on September 23, 2020 for further guidance.

USDJPY has given in over 200 points in the last 5 trading sessions and print 104.80 yesterday. The exchange rate is trading above 105.10 as we prepare to publish and it remains to be seen if safe haven US Dollar could recover against Japanese Yen. The anti-risk Japanese Yen has significantly gained against EURO, GBP and USD in the past few sessions.

SPX500 pushed higher through 3428 levels before selling off post FOMC yesterday. The indice finally managed to close lower by -0.50% at 3385 mark. Futures are trading lower today around 3360 mark for now and it remains to be seen if risk aversion continues further. The US Dollar Index might further strengthen in that case.

Technical Analysis:

SPX500 might remain in control of bears until prices stay below 3600 mark. The indice had reversed sharply to break below 3350 initial support earlier. Further, the pullback rally has stalled around 3428 levels until now as bears might be preparing to resume lower.

SPX500 has remained in control of bulls since March 2020 lows around 2190 levels. The indice has completed an impulse rally between 2190 and 3588 levels respectively. Ideally, it should produce at least a meaningful corrective drop going further. Also note that prices have broken below immediate trend line support as well.

SPX500 might continue its counter trend rally beyond 3428 levels but it should remain well capped below 3588 levels. Also note that fibonacci 0.618 retracement of the entire drop between 3588 and 3300 is seen around 3480 levels. High probability remains for a bearish bounce if prices manage to reach there.

Most traders might be preparing to initiate fresh short positions around 3480 levels, with protective stop above 3600 mark and projected target towards 2800 levels at least. Kindly note potential remains to push below 2190 levels in the next several weeks.

Prepared by

Harsh Japee, Technical Analyst.

SPX500 Chart

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