The weekly trend in S&P500 is still contained in the bullish regression channel and the weekly support level has formed roughly to the area of the previous pivot high. Financial sector ETF (XLF) has rallied from the rising trendline. This is important as the markets rarely rise without the support from the banking stocks. Friday’s reaction to Non-Farm Payroll figures wasn’t very encouraging as the S&P 500 closed lower and so did the XLF. The support at 1961 to 1974 area has been holding well which will add pressure to the resistance level at 2063 area. In an uptrend it is more likely that a resistance level will give in and the support levels hold. Other key sectors such as energy (XLE), industrials (XLI) and basic materials (XLB) look technically sound in the weekly picture. The utilities sector (XLU) lost 4,12% on Friday suggesting that the run for the safety is now over as the long only funds move money from safety oriented investments to higher beta (more riskier) stocks. Many sectors have risen a lot over the last few days so we might well have a reaction lower from the current levels.
Sideways move has been pretty well defined with the support at 1974 and resistance at 2062.50. Friday’s candle was a no demand candle at resistance and indicates a move lower from the current levels. The daily Bollinger bands coincide with the resistance level and the overbought Stochastics support bearish indication by the no demand candle.
S&P500, 240 min
The short term trend higher from the 1974 support was reversed at resistance and we are looking at support levels that could stop the decline. There is support at 2025 region where a pivot low and the daily Bollinger bands coincide. The pivot low is at 2020.75 and the 1.5 stdv Bollinger band is currently at 2028. This area also has the 50% Fibonacci level at 2021 which together with the other technical factors suggests that this region is a potential support level. Should this level not hold, then the support at 1974 area would come into play.
The long term technical picture in the US stock market is still healthy but in the short term picture we still have signs of indecision (range bound trading). Friday’s market reaction to better than expected employment figures wasn’t brilliant but at the same time we have money moving away from dividend paying safety stocks (utilities sector) into banks, basic material related stocks and energy stocks which means that the risk appetite is increasing. The overall picture is therefore slightly mixed. This means that the market remains as a traders’ market with opportunities at technical support and resistance levels. The daily no demand candle from Friday indicates that the levels above the current market price have resistance and we should therefore see a move lower today. The levels with most potential are those at the edges of this sideways move. However, the levels inside the range can provide opportunities as well. Just look for price based confirmation to confirm the analysis before taking trades.
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Chief Market Analyst
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.