Bottom line: SPX500 long term bearish structure remains intact until 3400 holds good. Bulls have managed to push a bit higher towards 2970 levels but it is just a matter of time before bears are back in control.
Fundamental Outlook:
SPX500 along with Dow Jones and NASDAQ inched higher by over 2.5% yesterday and managed to close at 2939. SPX500 futures continue to trade higher at 2970 while we are writing this article and it remains to be seen how the indice behaves when US markets open.
Despite the negative US GDP figures (-4.8%), markets continued to rally amidst COVID-19 drug trials, earnings and the Fed leaving rates unchanged. There are also talks of further stimulus package by the Fed if required.
USDJPY continued to slide lower yesterday and closed around 106.58 levels. The US Dollar lost its ground due to several factors: Contracting GDP figures, COVID-19 pandemic, Over 26 million jobs lost in the past few weeks and continued fears of further slide in GBP for the next quarter. The USDJPY is set to drop further towards 101.50 levels.
Technical Analysis:
SPX500 continued its counter trend rally yesterday and pushed through 2960 levels. This move did not come as a surprise and it was much awaited before bears could take control back. SPX500 is now expected to produce a bearish reaction any moment and resume lower towards 2200 mark.
Structurally, SPX500 had managed to produce an impulse drop between 3400 and 2200 levels respectively. It clearly confirmed that the drop is still incomplete and would resume after a counter trend rally is complete. Now, the expected corrective rally since 2200 lows, seems to be complete around 2960 levels. This is also fibonacci 0.618 retracement of the earlier drop and hence high probability remains for a bearish reversal.
Most traders might be initiating fresh short positions between 2950 and 2970, with protective stop above 3400 and projected targets towards 2200 and further.
Prepared by
Harsh Japee, Technical Analyst.
SPX500 Chart
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