Strategic Finance

S&P 500 rally was a technical bounce

 Print E-mail
Strategic Finance
Written by Roberta Murray   
Monday, 28 June 2010

AVA fx: We’ve said for the past 3 weeks that rally was just a technical bounce, and this past week confirmed it.

 

The S&P 500 Index (INDEXSP:.INX)  is expected to open higher on Monday. S&P 500 futures are higher by 0.35% at 1078.50 at 11:30 AM in London.

The technical analysts at AVA Fx say that the rally in the S&P 500 over the past 3 weeks was just a technical bounce, and this past week confirmed it.

"The week’s price action decisively worsened the index’s  technical picture for the longer term, and given the S&P 500’s status as THE risk appetite indicator, the technical picture for risk assets in general," reads an analyst note.

A few points to note about the below S&P 500 weekly chart:

  • By closing at 1076, the week’s price action left the index (and again, by extension risk appetite in general) closing :

  • Below its 23.8% Fibonacci retracement level at 1086.05 as traced from the beginning of the March 2009 rally

  • Below its 38.2% Fibonacci retracement level at 1087.03 as traced from the beginning of the July 2009 rally

  • Below its 50 week moving average

The week also created a classic bearish ‘engulfing’ candlestick pattern, which not only wiped out the past 2 weeks’ candlesticks but also took the index and overall risk asset position back to the lows of early February 2010.

"In sum, the nascent reaction bounce rally hit a wall of bad news on US housing, European banking, Yuan revaluation doubts, and technical resistance that sent markets lower. Gold and oil essentially flat on the week. Markets boost the GBP, the strongest currency for the week, on the new austerity budget to cut the UK deficit," says the technical note.

"However for a more sustained GBP rally we’ll need to see positive growth data that suggests the new austerity won’t kill the UK recovery. Given that much of the austerity measures don’t take effect until next year, the UK could yet see some adequate growth figures and give the GBP rally further life,  especially if the US and Europe continue to struggle."

 
 
Share this article:
Digg It! Digg it!   Post to del.icio.us del.icio.us   Seed in Newsvine Newsvine   Post to reddit Reddit   Facebook  Stumble It! Stumble It!  

Subscribe to our weekly newsletter for top jobs, news, blogs and more

Get the latest senior finance job roles, news, blogs, features, industry moves and opinion delivered directly to your inbox every week. Sign up here .