Bottom line: SPX500 long term structure continues to remain bearish against 3400 resistance. The indices seems to be close to completing its counter trend rally (around 3280) that began from sub 2200 levels in March 2020.
Fundamental Outlook:
SPX500 managed to rally by +0.50% yesterday, closing around 3275 mark; supported by Q2 earnings. Believe it or not, the recent rally across Global Indices remains in complete divergence to reality. The indice might be taking its cues and trigger volatility, as US Congress debate over the new fiscal stimulus package.
COVID-19 infections still remain a major concern across US and Asian countries. US-China relations further deteriorated after US announced closure of Houston’s consulate yesterday. A Global Economic recession still looms large over COVID-19 pandemic effects. These facts might flip investor sentiment which is looking too optimistic at the moment.
NZDUSD is up over +0.50% as we prepare to publish today’s article, and is trading 0.6685 levels. The risk associated currency has been one the biggest beneficiaries since the exchange rate has risen from 0.5470 through 0.6685 levels. Traders might remain cautious around 0.6700 levels though.
Technical Analysis:
SPX500 might be preparing to resume lower from 3280 levels, as bears remain inclined to take control back. The indice is testing a major resistance close to 3300 mark and probabilities remain high for a bearish reversal ahead. Bottom line remains that 3400 should hold good.
SPX500 had earlier drooped in an impulse wave from 3400 through 2200 respectively. As discussed earlier, the indice followed up with a counter trend rally that has lasted more than 15 weeks and managed to reach close to 3300 mark.
Furthermore, also note that the counter trend rally has reached up to fibonacci 0.88 retracement, of the earlier drop. This might be the last level of resistance, before SPX500 reverses sharply towards sub 2200 levels. Traders might be preparing to initiate fresh short positions here.
Prepared by
Harsh Japee, Technical Analyst.
SPX500 Chart
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