Technical analysis of US500
US500, the representative CFD based on the S&P 500, has strengthened on the whole this week as risk appetite remains fairly high. A weaker dollar has encouraged foreign buying of various American shares and of course the Fed continues its policy of unlimited QE, with much of the new money continuing to flood into stock markets.
There’s no clear high resistance on this four-hour chart but we can point to the all-time high around 3,590 on the dailies as being the main area of focus for bulls in the medium term. Low support here occurs around the latest swing low near 3,200.
Technical indicators on US500 H4
Moving averages are mixed. The 50 SMA from Bands has recently completed a golden cross of the 100 although the former remains below the 200 SMA. Price meanwhile has now clearly broken through the 200 SMA to the upside. The main support from moving averages in the short term is likely to be the 200 SMA around 3,390.
US500 is overbought based on both the slow stochastic (15, 5, 5) and Bollinger Bands (50, 0, 2). The stochastic at about 90 is halfway between the cutoff for overbought and the maximum reading, so a technical consolidation or possibly a pullback is a distinctly possible scenario over the next few days of trading. Volume remains low with somewhat more selling than buying so far today.
Price action and Fibonacci
The interrupted three soldiers from 4.00 GMT yesterday would typically be taken as signalling ongoing gains. However, in the context of a definite overbought signal from indicators, new buyers from here should act with caution. The attempt to form a downward engulfing pattern around lunchtime today GMT has been rejected, but traders should probably await completion of the current period before committing themselves either way.
There was no attempt during the recent wave of losses ending on 25 September to test the 50% area of the daily Fibonacci fan. Even amid high volatility around the upcoming election, we can probably expect this zone to hold as a support unless the result is very bitterly disputed. Looking at the immediate future, the 50% retracement area is likely to flip to a support after being tested successfully yesterday evening. Next up if gains continue is the 61.8% retracement around 3,450.
Technical analysis of US500: summary
With no major economic releases or fundamental events tomorrow, technical consolidation looks likely for US500 into the end of the week. The key areas to monitor tomorrow are likely to be the 50% Fibonacci retracement from the four-hour chart followed by the 200 SMA.
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