Senior Market Strategist

Total Content 192

Articles 176

Update on the S&P 500

By David Morrison  |  29/10/2018 15:57
”market

Traders are having to cope with large intra-day moves on global stock indices. This has caused concern as it follows an extended period of low volatility

US and European stock indices flew higher on Monday in moves which, so far, have more than reversed Friday’s losses. This has helped restore some confidence. Many commentators expressed concern last week that global equity markets could have much further to fall. Today’s price action has calmed nerves to a degree, helping to convince some traders that the October sell-off will turn out to be a perfect ‘buy-the-dip’ opportunity. Yet there are arguments which suggest investors would be wiser to use any rallies to lighten up on their exposure to equities.

Shanghai Composite under pressure

Today’s rally came despite weakness in China’s Shanghai Composite. Overnight it lost over 2% as investors fret about the ongoing slowdown in Chinese economic growth while the yuan weakened further. The USDCNY pushed above 6.96 and is now within spitting distance of 7.00. This level is considered a ‘red line’ as far as China/US trade relations are concerned. If the yuan were to fall below here (the US dollar to rise above) then this would give President Trump an excuse to ramp up tariffs on US imports from China.

Merkel announces retirement

German Chancellor Merkel announced that she would not be standing for re-election as either leader of her Christian Democratic Party (CDU) in December, nor as the country’s leader in 2021. This follows on from yet another dismal showing for the CDU in state elections this weekend. The news sent the euro lower initially, but it soon bounced while the DAX shot up over 2%.

Share buybacks restart

The rally in US and European indices comes as markets were looking oversold. Analysts also pointed out that around 48% of S&P 500 corporations are now out of the earnings ‘blackout’ period. This means that they are free to indulge in share buybacks which has been one of the major drivers for the US bull market over the last few years. The earnings season is still ongoing, and investors continue to punish companies that miss analysts’ forecasts – particularly on the sales side. Alphabet and Amazon released disappointing revenue numbers after Thursday’s close. The latter also gave out some negative forward guidance for the fourth quarter.

Resistance around 2,700

As to the S&P 500: technically the first area of resistance remains around 2,700. As is shown on the chart, the area around here acted as support in June/July this year. It also roughly marks the 61.8% Fibonacci Retracement of the April/September rally, so it can be seen why it is significant. A break above here would mean that the next upside target was the 200-day moving average which comes in around 2,760/70, depending on which moving average you use. A break below increases the possibility of a retest of the April lows or even those from January/February this year.
 
 
”share  
 
Any information, analysis, opinion, commentary or research-based material on this page is for information purposes only and is not, in any circumstances, intended to be an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any person acting on it does so entirely at their own risk and GKFX accepts no responsibility for any adverse trading decisions. You should seek independent advice if you do not understand the associated risks.
 

Share

Author's Other Opinion & Analysis

Show More Articles

RISK WARNING

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.

If such information is acted upon by you then this should be solely at your discretion and GKFX will not be held accountable in any way.

  • ForexF
  • IndicesI
  • CommoditiesC
        Back

        Login to Market Insight Account

        Your Market Insight account gives you access to the tools that we offer our customers including our
        Technical Studies & Sentiment for your accounts.

        Forgot Password?

        Don't you have a Market Insight account? With a few easy steps you can easily register to Market Insight

        Create a Market Insight's Account

        Your Market Insight account gives you access to the tools that we offer our customers including our Technical Studies & Sentiment for your accounts.

        register_ty

        Thank you!

        Welcome to Market Insight family!

        You have succesfully completed the registration.
        We will send you an e-mail to give you some
        instructions and our Terms and Conditions!
        Our account representatives will be contacting you as
        soon as possible. If you have any further questions
        please do not hesitate to mail us via info@marketinsight.com