CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Chart of the day Potential capitulation in SP 500

Article By: ,  Financial Analyst
February 6, 2018 11:00 AM

Short/Medium-term technical out on U.S. SP 500 Index (Tues, 06 Feb)




Key technical elements

  • The earlier anticipated corrective decline of U.S. SP 500 Index (proxy for the S&P 500 futures) right below the 2880 resistance has declined by 12% to print a low of 2531 as seen in today, 06 Feb Asian session. Click here & here for a recap. Interestingly, the decline has stalled right at a major support zone of 2540/30.
  • The major support zone of 2540/30 is defined by a confluence of elements. The pull-back support of the former long-term ascending channel resistance from Mar 2009, the ascending channel support from 11 Feb 2016 low & a Fibonacci retracement cluster (38.2% Fibonacci retracement of the up move from 27 Jun 2016 low to 29 Jan 2018 high & 1.618 Fibonacci projection of the recent decline from 29 Jan 2018 high projected to yesterday, 05 Feb U.S session high) (see weekly & 4 hour charts).
  • Based on the Elliot Wave Principal/fractal analysis, the decline from 29 Jan 2018 high may have met a potential minimum intermediate degree corrective wave (4) target at 2540/30 where the Index can shape a potential bullish reversal.
  • Based on intermarket analysis, the recent 1week plus of decline seen in the S&P 500 has been associated with rising U.S. government bond yields where we have highlighted earlier in my “2018  Global Markets Outlook - Staying Nimble” that the 3% mark is a crucial level to watch in the 10-year U.S. Treasury yield. The narrative that triggered a stock market sell-off via a spike in bond yields is due liquidity tightening conditions. On the contrary, yesterday (05 Feb) steep decline seen in the U.S. session is not associated with a spike in the 10-year U.S. Treasury yield where it declined and formed a daily bearish “Harami” candlestick pattern. These observation suggests that recent run-up in the 10-year yield is due for a potential retracement/pull-back below the key 3% level. Thus, it may add as a “comforter/hand-break” to the steep decline seen in the S&P 500 (see last chart).
  • The significant short/medium-term resistances stands at 2694 follow by the 2740/60 zone (61.8% Fibonacci retracement of the decline from 29 Jan 2018 high to today Asian session low, yesterday, 05 Jan U.S. session former swing low area & the minor descending trendline from 296 Jan 2018 high).

Key Levels (1 to 3 days)

Intermediate support: 2600

Pivot (key support): 2540/30

Resistance: 2694 & 2740/60

Next support: 2480 (long-term pivot)

Conclusion

Today’s steep decline coupled with the above mentioned highlighted elements may have triggered a capitulation in the Index where a potential “snap-back” rally can materialise. As long as the 2540/30 pivotal support holds, the Index is likely to shape a recovery towards 2694 and a break above it opens up scope for a further potential push up to target 2740/60.

However, failure to hold above 2540/30 should invalidate the recovery scenario for waterfall slide to test the 2480 long-term pivotal support.

Charts are from City Index Advantage TraderPro  & eSignal


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024