S&P 500: Long And Short Of It

The S&P E-mini closed the session with a bullish engulfing candle yesterday and has broken to an intraday high in Asia, on the back of positive news on the US-China trade negotiations. According to President Trump, China has indicated trade talks are advancing, which raises hopes that a trade deal could be signed in Chile next month.

Still, the &P500 has reported YoY decline in earnings for a third quarter, which is currently -4.7%. Whilst revenues are higher at 2.6%, it points towards as squeeze on net profit margins for Q3. So it’s not all rosy at the highs.

(Click on image to enlarge)

From a technical standpoint, it trades just 19 points from record highs which has bulls on high alert for a fresh breakout. Yet there’s also the potential for this to morph into an ascending triangle, which leaves room for at least another cycle lower (with a higher low or two) before breaking out.

  • The reward to risk potential is unappealing for bulls, being so close to the all-time highs, Therefor, they may want to wait for a break above 3029.50 for even a daily close, before assuming a breakout is underway.
  • Bears could also consider fading into any minor rally below key resistance. However, keep in mind this is counter to the long-term uptrend so likely carries greater risk.

Assurant CFD/DFT (AIZ): Currently around 25% up for the year, this household insurance company has outperformed both the S&P500 and financial sector. Structurally, the daily trend is clearly bullish and is on the cusp of breaking to a new 52-week high. The 50-day eMA provided support and marks the potential swing low, and yesterday’s gap higher saw it gap out of compression. Given we’ve just seen over a month of consolidation at the highs, there are no clear signs of overextension despite it sitting near its record highs.

  • A clear break (and / or close) above 127.76 assumes bullish trend continuation.
  • The trend remains bullish above 121.25, although we could also step aside if momentum reverses and breaks beneath the small doji around 124.46
  • Being near record highs, traders could use an open target if trading the daily timeframe
  • Intraday momentum traders could also monitor this for a break higher, whilst swing traders could wait to see if the 127.76 area holds as support
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