Technical Analyst, Saxo Bank
Summary: The past 8 days of selling in US Equities looks to be set on pause for a few days. Minor correction should be expected. But a correction that most likely will not be long lived before selling could hit Equities again
S&P 500 ended last week with a neutral day. Short term the sell off could be exhausted and a minor rebound over the next couple of days should be expected.
However, the trend is down. No divergence on RSI indicates we are still to see lower levels towards the end of June.
A rebound will likely be short lived to resistance at 3,838 where selling pressure is likely to return. If S&P 500 closes above 3,838 it will try to close the gap up to 3,900. If it fails, it is a strong sign of weakness.
Down trend in S&P 500 accelerated last week breaking below falling lower trend line. There is no strong support until around 3,500 i.e. top of the consolidation area and 0.50 retracement of the 2020 low to 2022 peak. A dip below the 200 weekly SMA to 3,385 is not unlikely. However, the strongest support is around 3,210 which is both the 0.618 retracement
AND the bottom of the correction prior to the confirmation of the start of the bull market Q4 2020.
RSI in a falling channel with no divergence supporting the picture of lower levels.
Nasdaq 100 is set to open higher today after a long weekend. A correction to around 11,747 is likely before selling pressure most likely resumes. RSI is showing divergence supporting the correction scenario. A correction that could extend to around 0.618 retracement at 12,186 if the Index closes above 11,825. A close below 11,037 down trend will resume
Nasdaq spiked lower Friday retracing a few points off the top of support area of 10,960. RSI is showing divergence indicating weakening of the down trend. However, the trend IS still down and no bottom and reversal pattern formed meaning lower levels should be anticipated. The strong Consolidation/support area is key for the longer term picture
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.