Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Technical Analyst, Saxo Bank
S&P 500 yesterday formed an outside day in the form of a bearish engulfing top and reversal candle; sellers took control from the opening bell and kept it throughout the trading session.
The chart is now sending mixed signals. RSI is still showing positive sentiment with no divergence, i.e., not indicating uptrend exhaustion. However, the bearish engulfing candle is a strong and reliable top and reversal pattern, strongly indicating a correction is likely to unfold.
A correction could take S&P 500 down to support and the 0.618 retracement at 5,101, with some support at 5,193. A daily close below 5,100 could establish an actual downtrend with potential to fall below 5,000.
For S&P 500 to cancel the top and reversal pattern and extend its bullish trend, a daily close above 5,342 is required. If that occurs, S&P 500 could push higher to 5,457–5,502.
Nasdaq 100 has formed a top and reversal candle. A correction is likely to unfold down to 18,168, possibly down to 17,808–17,712.
There is no RSI divergence, indicating this is merely a correction unfolding before the uptrend resumes. However, if Nasdaq 100 closes below 17,712, an actual downtrend could be in the cards.
A daily close above 18,908 will extend the uptrend with upside potential to 19,385.