sp 500 challenging 2155 medium term pivotal with mixed elements 1824522016

Daily Outlook, Wed 03 August 2016

(Click to enlarge charts)

What happened earlier/yesterday

The U.S. SP 500 Index (proxy for the S&P 500 futures) has breached below the 2155 medium-term pivotal support in yesterday’s U.S. session (02 August). It printed a low of 2147 in the mid-U.S. session before it managed to inch back up above 2155 and recorded a daily close above it.

This decline came in line with the JGB 10 year yields that has spiked up to -0.06% (4^th consecutive day of rallies from 27 July 2016 low of -0.291 and renewed JPY’s strength that saw the USD/JPY breached below last Friday’s low of 101.94 and tested the upper limit of the long-term key support at 100.70 before it shaped a push up in the late U.S. session. In addition, the Japanese cabinet has approved 4.6 trillion yen in extra spending for the current fiscal which is just a fraction (16%) of the total 28 trillion yen stimulus package announced last week by PM Abe.

Please click on this link for a recap on our previous daily short-term technical outlook/strategy.

Today key U.S. economic data/releases will be as follow:

• ADP Employment Change for Jul @1215GMT (170K consensus)
• Markit Services PMI for Jul @1345GMT (51.00 consensus)
• ISM Non-Manufacturing PMI for Jul @1400GMT (56.0 consensus)

Key elements

• Current price action of the S&P 500 has declined by 1.6% from this Monday (01 August) high of 2183 which make it an outperformer versus other major benchmark stock indices that recorded a decline of 3% to 4%. Yesterday’s low of 2147 has stalled right at the minor swing low area of 13 July 2016 (see 4 hour chart).
• The 4 hour Stochastic oscillator has just exited from its oversold region which suggests that the downside momentum of the on-going decline has started to abate. This observation suggests a potential rebound in price action of the Index at this juncture.
•  Yesterday’s decline has led the Index to breach below the lower boundary (depicted in dotted brown) of the 2-week old short-term ascending range in place in since 14 July 2016 now turns pull-back resistance at 2160/65 which also confluences with the 50% Fibonacci retracement of the current decline from Monday, 01 August high to yesterday’s low of 2147.

Key levels (1 to 3 days)

Resistances: 2165 & 2183

Supports: 2147 & 2120

Conclusion

Prefer to turn neutral due to mixed elements.  Only a break above 2165 is likely to revive the bullish tone for a potential push up to retest this Monday’s minor swing high at 2183 in the first step.

On the flipside, a drop below 2147 may open up scope for a deeper decline to test the upper limit of the former significant range top that has capped prior advances since May 2016 now turns pull-back support at 2120.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.