Bottom line: SPX500 has resumed its drop towards 2200 and lower levels after carving a lower high at 2972 levels on April 30, 2020. The long term structure continues to remain bearish until the indice stays below 3400 levels. Immediate resistance is seen at 3140 levels.
Fundamental Outlook:
SPX500 continued its sell off yesterday as the indice closed at 2820 levels, down by -1.75%. Its counterpart Dow Jones also followed in the red, closing lower by -2.17%. Fed Chair Jerome Powell had ruled out any possibility of a Negative Interest Rate Policy, which added fuel to the much expected drop since last several trading sessions. The effect of COVID-19 pandemic on the economy is going to be long-term, he added further.
USDJPY gained yesterday as US Equity Markets tumbled again after a negative interest rate policy was ruled out. Safe haven US Dollar and Japanese Yen remained beneficiaries as they gained across majors. The USDJPY is trading around 106.80 levels as we write this article and could be heading towards 105.00, going further.
NZDUSD pushed lower yesterday as the Reserve Bank of New Zealand kept OCR unchanged at 0.25%. The New Zealand Dollar reversed lower from 0.6100 mark and could still come under pressure if drops below 0.5900, as RBNZ maintains a dovish tone for its monetary policy going forward. Though there are no indications of immediately adapting a negative interest rate policy, RBNZ would be required to step up measures for further stimulus.
Technical Analysis:
SPX500 seems to back in control of bears since printing highs at 2972 on April 30, 2020. The drop from 2945 through sub 2800 levels is now expected to be retraced towards 2900 levels, before resuming lower again. An intermediary top seems to be in place at 2972 now and ideally SPX500 should remain below that mark.
Structurally SPX500 had dropped from 3400 through 2200 levels as an impulse wave. The subsequent rally towards 2972 has been corrective and a bearish reversal was a high probable expectancy. Price action has confirmed that the trend might have reversed and bears are back in control as series of lower highs and lower lows are in place on smaller time frames.
Traders might have initiated fresh short positions around 2900/30 levels earlier, with protective stops above 3400 mark and projected target below 2200 levels respectively.
Prepared by
Harsh Japee, Technical Analyst.
SPX500 Chart
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