Technical Analyst, Saxo Bank
S&P 500 correction was short-lived, only retracing to the 0.50 Fibo retracement just 4,100.
Heavy selling yesterday is very likely to not be a single event, it could accelerate is S&P 500 breaks below 3,886. RSI didn’t even touch the 60 threshold and is showing negative sentiment. A close below 40 will confirm the bearish picture.
A bearish picture that is likely to push S&P 500 to test support at around 3,738 and June lows at 3,636.
But that might not be the exhaustion of the down trend. If the RSI on the weekly chart closes below its lower rising trendline and below 40, it supports the bearish picture. A bearish picture that would strongly indicate S&P 500 could drop to around 3,200 going in to Q4 i.e., the lower range of the consolidation area from Q4 2020 and the 0.618 Fibonacci retracement of the 2020-2022 bull market.
It is also the 1.618 projection of the Q3 correction.
Expect a correction around the 3,636-3,509 area before next push lower. A possible scenario is illustrated by arrows on the chart.
To reverse this bearish picture S&P 500 needs to close above 4,325.
Nasdaq 100 sell-off closed yesterday a few cents below the 0.618 retracement and support at around 12,046. A move below last weeks low at 11,928 is likely to fuel the selling pressure and push Nasdaq 100 to test June lows at 11,037.
RSI closed yesterday below 40 supporting the bearish view.
‘On the weekly chart RSI is currently below its lower rising trendline. If closing the week below and below the 40 threshold it will support the bearish picture unfolding. A bearish picture that can take Nasdaq 100 to test the key support at 10,768, close to the 0.618 retracement level at 10,589. However, the bearish trend could take Nasdaq much lower. A close below 10,589 could further fuel a sell-off down around 9K.
To reverse this bearish outlook a close above 13,721 is needed. 9,378 is 1,618 projection of the Q3 correction and close to the 0.764 retracement of the 2020-2022 bull market.
2024: The wasted year
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.
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.