Daily Client Note
Global Market Review
Showtime For S&P 500 Valuations
The US fiscal challenge has dominated news headlines over the last two weeks, and has quickly replaced long-forgotten news feeds that were dominated by quantitative easing implications. Traders have recently been witnessing the reaction to Q2 earnings reports that have offered a mixed bag of results, and have offered very little in regard to overall equity indices potential to push higher through resistance.
With GDP expectation being downgraded, the focus may now shift to S&P 500 mid-term expectancy which will weigh heavily on USD valuations. The US administration public stance of a strong-dollar policy has been derided by some as blatantly unrealistic, and is something that really cannot happen without S&P 500 valuations dropping below 1250.
Market mechanics are not revealing which direction will offer the path of least resistance for S&P 500 trade, and July is unlikely to easily form a sustainable long or short trend without a huge increase in daily participation levels.
The interesting aspect of recent equity trade has been that when the S&P 500 moves lower the dollar index quickly tests near-term resistance. On the sessions of equity strength the dollar index tends to hold support. The dollar is being bought more easily on the days of equity weakness than it is being sold on days of equity strength. This inverse correlation will grow stronger as anticipation of further quantitative easing builds and fiscal debt levels are examined.
For those traders and investors with a finger on the pulse of global trade there is a way to trade Wall Street movement ahead of the 09:30 ET open. Currency trade which offers a 24-hour accessible market, low cash requirements, and high liquidity, with moves that track the same momentum that impact Wall Street, but with an ability to access them as they unfold in overseas trade. Keeping an eye on global momentum, and tapping into the global market moves is becoming a popular way for savvy traders to level the playing field and negate pr and after-market volatility.
The following is a technical review of what can be expected from the S&P 500 and Dollar Index this week. Clients will receive daily Market Alerts, actionable Trade Signal calls to action, and research papers during the course of this week as price action unfolds. Equities, ETF’s, Bullion, Oil and Currency markets all monitored 24-hours a day; why not let TheLFB trade desk do the heavy analytical lifting for you?
The S&P 500 Review
S&P 500 futures are trading in the price range set in Jan, Mar, Apr, May, and Jun 2011, between 1290 and 1350. The 4-hour charts offer a dramatic technical display that reflects the impact of manipulative quantitative easing (QE) programs on equity indices trade.
The 20, 50, and 100-day SMA area at 1310 were called out as areas that were likely to be tested technically before the next major upside leg could easily break 1360. Traders saw that move transpire, and must now be patient while waiting for the near-term signals off a break above 1320, or below 1295.
No mid-term long signals will form on ES until a Weekly chart closes above 1355. No mid-term short signals will form until a Weekly chart closes below 1275. Clients will be updated if either move looks sustainable.
Market mechanics are not revealing which direction will offer the path of least resistance, and July is unlikely to easily form a sustainable long or short trend without a huge increase in daily participation levels.
S&P 500 4-Hour Chart
The A leg looks to have formed with a break higher from 1255 that tested 1355 resistance. The B leg reversal to support at 1305 indicates that the C leg could technically move higher, but will struggle to hold above 1355.
The 1375 area is the outside target range for even the most bullish of equity outlooks. A more realistic view would be to see volatile intra-day moves in reaction to earnings reports that struggle to break previous session highs and lows with ease.
This Week's Call To Action:
Theses charts reveal an inability to create anything other than synthetic trading activity on a daily basis via earnings and debt-related news-wire headlines reactions, which will become exaggerated as the market is taken off the Federal Reserve intravenous liquidity drip feed.
A 4-hour chart algorithm signal was generated Jul 11 11 with a move below 1310 which targeted 1295, and has completed its cycle.
The Dollar Index Review
The dollar index is trading at the 50 and 100-day SMA area around 75.50, which was a pivotal price point in Mar, Apr, May, and Jun 2011. There have been eighteen moves that have broken this same price point, both long and short, in as many weeks in a technical reflection of a global currency market absorbing major fundamental changes.
These include central bank jawboning that is certainly designed to get a job done verbally that cannot be easily completed via the inter-bank market. A consequence of this is that most 24-hour trading sessions have one 60-minute period of trade that houses the majority of any day’s dollar movement. Breaking and holding the previous session dollar index high or low is extremely difficult to accomplish.
No mid-term long signals will form on DXY until a Weekly chart closes above 76.50. No mid-term short signals will form until a Weekly chart closes below 74.50.
Dollar Index 4-Hour Chart
Choppy and overlapping chart patterns are caught in a 4-month trading range with no clear technical signals. The 200-day SMA area at 77.10 will not be easy to break. A trend-line at 74.50 looks to be important support for global USD-based reserve valuations.
This Week's Call To Action: Look to sell the test of resistance at the previous day’s high. Look to sell the test of support at the previous session low. Bank both trades at near-term targets. DXY may create buy signals from 75.90 that test 76.90 if S&P 500 drops lower and holds under 1295 this week.
Any DXY sell signals will require S&P 500 trade to hold easily above 1325, which is something that has not been easy to achieve recently.
A 4-hour chart algorithm signal was generated Jul 14 11 with a close below 74.80 that failed to trigger.
Daily Client Note