Bottom line: SPX500 long term bearish structure remain intact since price are trading below 3400 mark. The indice might have managed to carve yet another lower high around 2972 levels (future rate) last week.
Fundamental Outlook:
SPX500, along with Dow Jones continues to point lower, as expected and discussed earlier. The SPX500 closed -0.70%, while Dow Jones at -0.91% respectively yesterday. After having recorded over 30% rally between March 23 and April 2020, the SPX500, along with global indices are back under pressure. The effects of Fed stimulus packages seem to be fading as the world stares at a Global Recession induced by COVID-19, and US-China trade war fears ahead.
USDJPY exchange rate hit 106.00 mark yesterday as the Japanese Yen strengthened with US indices heading lower. The US Job markets (over 21 million jobs lost in past 4 weeks), trade war fears between the US and China may add further pressure on the USDJPY rate, going ahead. The next levels to watch could be 105.00/20.
NZDUSD employment showed a surprising rise in the first quarter printing 0.7% against a forecast of -0.3% yesterday. This was unexpected since the country wide lock down due to the COVID-19 pandemic effect. NZDUSD rate continued lower and might have settled around 0.6000 yesterday. It remains to be seen how the exchange rate reacts to Reserve Bank of New Zealand monetary policy meeting on May 13. The bearish outlook for Global Indices would also weigh on the NZDUSD exchange rate.
Technical Analysis:
SPX500 futures had print 2972 highs last week, just above 2930 levels as expected, before reversing sharply lower. High probability remains for a meaningful top in place at 2972 mark and for SPX500 to resume its down trend. The objectives are 1750 and lower towards 2009 levels.
Structurally, SPX500 had dropped from 3400 through sub 2200 levels in an impulse wave. The corrective rally managed to reach just above the fibonacci 0.618 retracement of the previous drop, around 2935 mark. Furthermore, a potential bearish reversal has occurred since last week’s high at 2972 levels.
Hence traders might have initiated fresh short positions around 2900 mark last week, with protective stops above 3200 levels and projected targets below 2200 respectively.
Prepared by
Harsh Japee, Technical Analyst.
SPX500 Chart
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