Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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S&P 500 eyeing critical support
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: The benchmark US S&P 500 index is moving toward critical support levels as the escalating Sino-US trade war pulls valuations lower and boosts global risk-off sentiment.
In the S&P 500, watch out for the strong support level around 2,800 (2.798,77, to be exact) – the Relative Strength Index is bearish and the Bollinger bands are still expanding. This indicates a high risk we will see another push towards support.
If buyers fail to close today’s opening gap, downward pressure remains intact. A close below the 2.798,77 support area is likely to trigger a further sell-off down to around 2,730. If we see a downward move to that level, a trend is confirmed.
In case of a bounce from support levels, it is our view that a sideways market should be expected and not a push for a new all-time high.
The past week's candles were characterised by fairly long shadows meaning intraday highs and lows far from the open/close prices. This indicates a nervous market. It also means that if support levels are not broken, the market is more likely to take a wait-and-see approach, i.e. trading sideways in a range between 2,800 and 2,900.
If buyers fail to close today’s opening gap, downward pressure remains intact. A close below the 2.798,77 support area is likely to trigger a further sell-off down to around 2,730. If we see a downward move to that level, a trend is confirmed.
In case of a bounce from support levels, it is our view that a sideways market should be expected and not a push for a new all-time high.
The past week's candles were characterised by fairly long shadows meaning intraday highs and lows far from the open/close prices. This indicates a nervous market. It also means that if support levels are not broken, the market is more likely to take a wait-and-see approach, i.e. trading sideways in a range between 2,800 and 2,900.
The Russell 2000 could be a guide to what will play out. Contrary to the blue chips, the small-cap didn’t even come close to its all-time highs... 1,505.88 is the crucial level here. A close below 1,523 will confirm the downtrend.
In the Nasdaq 100 we see strong support around 7,300.
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