Today’s US equity market session is critical after yesterday’s technical break

John Hardy
Head of FX Strategy, Saxo Bank Group
Summary: The S&P 500's breach of its 200-day moving average means that we should all take notice, simply because the US market is the single largest market and always the basic proxy for risk appetite.
Though I am not an equity strategist, it is important to bear in mind that the US market is the single largest market and always the basic proxy for risk appetite. For this reason, every strategist needs to have their eye on the US equity market when a big technical break has unfolded, to consider the ramifications for other asset classes. See chart below:
- Arguably, today’s and this week’s closing level is very critical for the outlook from here now that we have crossed this technical “Rubicon”. The rally in the futures overnight would have taken the opening level back above the 200-day moving average at times, but the closing level is far more important.
- Put shortly, if the market closes on or near a new low it will make for a very uncomfortable wait for the Monday open. Recall that the 1987 crash unfolded on a Monday as well after a very ugly close into the Friday.
- This is not to call a crash but merely to suggest that the nature of today’s US session is potentially very critical.
Note the 40-week (200-day equivalent on the weekly chart) going back even further and the degree to which this level often is in focus:
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)