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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
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Head of Fixed Income Strategy
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Technical Update - S&P500 Nasdaq100 uptrends stretched. Indicators say correction looming
3 minutes to read
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: Uptrends in S&P 500/US500 cfd and Nasdaq 100/USNAS100 cfd are very stretched and charts are showing top and reversal patterns. Combined with divergence on indicators a correction should be expected.
Key supports to be observed
S&P 500 formed a Bearish Engulfing top and reversal candle 27th of July while there is massive RSI and MACD divergence. Strong indication of a reversal that has not yet materialized, Bulls are still too strong.
But divergencies i.e., an imbalance in the market cannot go on forever and will eventually needed to be traded out usually by a correction, but also sometimes by an even higher indicator level. In this case RSI needs to close above 76.36 value, which will require a massive bullish move.
First indication of the latter would be a close above the Bearish Engulfing candle i.e. a close above 4,607.
A break below the low of the Bearish Engulfing candle i.e., below 4,527 is likely to fuel a sell-off down to support at around 4,455, possibly down to 4,400 level. Strong support at around 4,328
If S&P500 is closing above 4,607 the top and reversal pattern is demolished and the uptrend is set to be extended
US500 cfd uptrend is stretched with RSI and MACD divergence. A rising wedge seems to have formed. RSI divergence indicating bearish break out. Support at around 4,458 and 4,384
Nasdaq 100 is hugging the lower rising trendline. A close below support at around 15,420 could fuel a sell-off down to next support at around 14,751.
A close above 15,932 will extend the uptrend, likely breaking above 16K
USNAS100 cfd Evening Doji top and reversal pattern is still in play. To cancel it a close above 15,933 is needed.
A close below 15,368 is likely to ignite a sell-off down to support at around 14,706.
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