Bottom line: SPX500 counter trend rally could face strong resistance around the 2800 levels. A bearish reaction there could resume lower again.
Fundamental Outlook:
Today’s highlights are the OPEC meeting outcome, the Euro zone Finance Ministers meeting amidst the Corona Crisis, Fed Chair Powell’s brief on the Economic Situation along with the global effect of COVID-19 pandemic.
Oil price outlook would depend on the OPEC meet output today. Last week had seen Oil prices rallying up to 40% on the possibility of an end to the price war between Russia and Saudi Arabia. A unanimous decision on a production cut would be constructive for Oil and could be heading north again. Output may be reduced by 10 million barrels per day, as hinted by Mr Putin last week.
Euro might come under pressure again if Euro zone Finance Misters fail to come to an agreement on the Corona Bond issue, due to COVID-19 crisis faced. Spain and Italy are in favour while Germany is in denial as initial talks failed. Overall sentiment would be favorable for the Euro if an agreement is reached.
Global Equity Markets continued to rally yesterday with Dow Jones hitting close to 23400/500, while the SPX500 closing around 2750 levels respectively. This was mainly backed by the ongoing stimulus added by most Central Banks and signs of COVID-19 new cases having peaked in the U.S.
New York, the epicenter of outbreak in the U.S, has seen around 10% drop in new cases along with lesser deaths. The total cases in the U.S still tops the list at 435,128, with 201 new cases and around 7 deaths.
Today’s Events:
- 08:30 AM EST US Initial jobless claims expected to print lower at 5000K against 6648K
- 08:30 AM EST CAD Unemployment rate set to rise at 7.5% against 5.6%
- 10:00 AM EST Fed Chair Powell to update on Economy
- 10:00 AM EST USD U. of Mich. Sentiment to print lower at 75.0 versus 89.1
- 10:00 Am EST OPEC+ Virtual Meeting
Technical Analysis:
SPX500 bulls remain in control as the counter trend rally gains momentum further towards 2750. The indice is soon approaching fibonacci 0.618 retracement around 2800 levels. Please remain vigilant as a bearish reaction could be possible around those levels.
The wave structure might be indicating that SPX500 might be close to resuming lower again if a bearish reversal is confirmed around 2800 levels. The drop s=could be sharp and most traders might be surprised as Wave 3 progresses further.
Most traders might be willing to take profits around 2750/2800 levels and wait for further confirmation of potential direction going ahead.
Prepared by
Harsh Japee, Technical Analyst.
SPX500 Chart
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