S&P 500 Downside Risks Develop

Futures on the S&P 500 continued trading lower on Wednesday as lower oil prices hit energy shares and offset small gains from technology stocks and renewed hopes of progress in trade talks between the US and China. With the midterms over, markets are focused on a flurry of fundamental issues. These range from global growth uncertainties to geopolitical tensions.

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The technical space for the S&P 500 continues from my previous report, where a potential bullish backdrop could have materialised if the 61.8% fib of the September to October decline gave way. However, this level provided strong resistance and consequently, the US benchmark had traded lower, through the 38.2% fib of the aforementioned selloff. This may now become an area of resistance alongside the monthly pivot at 2,749.

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On the daily, momentum and trending setups are bearish. Short-term 50/21 Day EMA’s are tracking lower. The 21-Day EMA is now at 2,754 and may offer resistance on attempted rallies. Moreover, the 50-Day is just above the 38.2% fib of the February to September advance, at 2,789. The RSI re-entered bearish land, currently at 43. The MACD seems to be converging and remains negative. The DI’s are negatively biased with the ADX falling.

On the 4Hr, the 50/21 EMA combination has provided a dead cross signal, suggesting further downside pressures. In addition, the RSI is also bearish. However, slight bullish divergence on the momentum indicator may offer some respite in the near term.

The overall bias remains to the downside. A breach through the 61.8% fib of the post February rally may open the doors to 2,628, the 76.4% fib.

  •  A 38.2% fib of the recent 2,602 to 2,812 rally, lies just below the 61.8% fib of the post February progress. This is at 2,685.
S&P Daily
S&P 4hr

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The above references the authors opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

Akif began his trading career from the London Academy of Trading after completing an accredited Level 5 Diploma in Professional Applied Financial Market Trading. He then went on to manage a fund at a proprietary trading firm within the City trading multiple asset classes over multiple timeframes and has recently begun writing daily reports on G10 FX, Equity markets and Commodities at the firm. Akif joined the Society of Technical Analysts in February 2018 to gain the MSTA (and CFTe) designation. He focuses on European Indices, FX and Commodities.
TA qualifications: Diploma in Professional Applied Financial Market Trading

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