SPX500 climbed nearly 1% today after earnings beats in the bank sector and jobless claims came in under the expectations at only 293K. The Fed also said that they may start to taper as early as November now which would mean a decrease in the hundred-something billion dollars in asset purchases each month.
Good economic news from the past two weeks has relieved some of the pressure the markets have experienced from inflation fears to NFP. On a technical basis, however, the index just broke out of a falling channel and has come back from the lows of last week. This is good news for investors who have been worried about a continued stretch to the downside, so we may start to see some more buying to finish out the week.
SPX500 made a clear break out of a falling trend line on the 1D chart and is nearing resistance at the 50 DMA. A close above this falling trend line will be good for the index as it would indicate a larger move to the upside. Today's 1% move in the morning is a good sign already showing us that there is some momentum here. If price can't break above, we may see a retrace to around $4370.
Big news regarding the stock market and USD tomorrow will be the main driver for SPX500's momentum ending the week and going into the next one. NFP and unemployment rate are expected to have improved from last month slightly. But the biggest factor that could turn the market in either direction is this issue with the debt ceiling.
Stock market investors might already be pricing in the expectation of a beat in expectations as the SPX500 is already above the falling trend line and up nearly 1% today. Unemployment claims also beat expectations today which is another good sign for stocks. I think the market has the potential to test up in the $4420s today and possibly range up there until the NFP news tomorrow. The debt ceiling issue that can make the US default seems to be less of an issue now as debates continue. This issue is extremely important and is the main cause of these massive market swings that have been happening recently. Social security and tax refunds are some of the things that can be impacted by a default because these benefits could get delayed indefinitely.
Here is SPX500 on the 4H chart breaking above the falling trend line and nearing resistance around $4420. A close above this falling trend line will give investors some relief that price might be more stable and the downtrend won't continue. However, this could all change tomorrow, although today's jobless claims beat could indicate a lower unemployment rate.
The Nasdaq looks strong today as well as tech stocks recover hard this morning. This index's falling trend line is quite a ways away from price right now, but it could have enough momentum to reach it in the next few trading days. Price just broke above resistance in the $14,900s but needs to close above to help ensure continued upside.
After a brutal month for crypto, stocks and gold in September, sentiment is beginning to change once again which could land us in another cycle of bullishness. But it's hard to decide where to put your money to get the best bang for your buck. Here are three ways you can tackle your investments this month:
The US stock market fell well over 5% this month as the Fed kept sending us mixed signals as to whether or not they will taper or not this year. Global equities struggled as well which turned into a mostly risk-off sentiment. Bitcoin fell as low as 18% last month after fears of China's crackdown put more pressure on the coin. In my mind, it seemed that the turbulence in the stock markets were more justifiable than the sell off in crypto. We already knew China was banning mining and transactions, but price sold even further in September. So looking towards a big move to the upside in crypto could be the better play.
2. Go risk-off
Times are still highly uncertain and very unstable when it comes to monetary policy and market sentiment, which could lead you to believe that things will continue. This could be very true, and the economy could continue to suffer; we have seen several weeks in a row of missed jobless claims expectations and higher-than-expected inflation rates. If this persists, gold could start seeing more demand. Or if economic sentiment improves, the USD might see another rise from the expectations of tapering and raising rates.
3. Just buy everything (read below)
Some experts would argue that diversification is the best way to invest, and usually, I don't think so. However, price action in September took most everything down. So there could be a chance that everything improves; if we saw gold, crypto and stocks fall last month, then we might just see an improvement in all three markets. Two may recover less than the other, one may recover worse, but this sets you up for the best chances of at least one market rebounding well. US stock market goes up more often than not, gold goes through month-long swings in either direction, and crypto has the potential to give you thousand percent returns.
Either way, there's lots of ways to go about this other than these three suggestions, but I think it's important to consider these three way before you set your heart on going all in on one thing. Figure out which could be best for you and your investment strategy. And remember to practice good risk management!
Election results in Germany has German equities mostly flat on the day as investors are watching the Social Democratic Party take the lead in the polls. In Washington D.C., legislation is toiling to raise the US's debt limit, pass Biden's agenda and avoid a government shutdown from defaulting on federal aid with hundreds of thousands still out of work.
Both indices are stagnant right now, but the fears in the US over the weekend might have subsided for now. I think this week will be pretty volatile for global equities markets especially in the US and Europe. The best way to trade these indices is probably on short term momentum, or intraday momentum. The tight election race in Germany and the fears of a shutdown in the US seem like they could have day-to-day catalysts. Looking for technical setups on the 4H and 1D seem like the best move here.
SPX500 is making higher lows and highs on the 4H chart which could be a good sign that the market wants to test resistance around $4489. Support lies around $4423.
Germany's stock index is behaving similarly to the SPX in the sense that they aren't really moving today. The two most recent 4H candles suggest that price wants to move higher, although the index has struggled to break above this falling trend line the all of September so far.
GER30 on the 1D timeframe also shows us the 50 DMA which the index has been respecting as a significant level to break. Here we can see multiple tests on that moving average before the index either breaks above or below. This daily candle looks like price rejected it and might cause a downtrend in the short term. Support is around $15,500.
Stocks are down -0.58% this morning after coming down to test a significant level of support once again. While stocks fall, the dollar rises in the anticipation of sooner-than-expected tapering by the Fed along with a hike in interest rates starting in 2022.
Other than September being one of the worst months for stocks, I think that we could be looking at an increasing investor uncertainty in the markets. Stocks have had a wonderful year for the most part, and they could definitely keep rising. But, it's important that we keep an eye out for these corrections that happen once in a while; and this 50 DMA indicator could be what sparks a sell off.
SPX500 came all the way back down to its 50 DMA after what looked like a promising bounce on the 1D chart. This leads me to believe there is an overall weakness in the stock market right now, and that we might see another leg down during this month. I think clean support could be at $4400 if stocks were to fall that far down.
This morning's report on CPI m/m and core CPI m/m came in at a lower percentage than expected which resulted in a falling dollar pre-New York session. The USD is now volatile under the uncertainty of potential tapering and rising rates while the equities market seems to be rising because of this.
This news looks to be better for the market, although I still feel like anything suggesting a closer indication to tapering also means that we're getting closer to a rise in interest rates. That would be strong for the USD and bad for equities. But investors might be taking this as a recovery in the economy as inflation slows, so this week could be good for the stock market as long as the end of the week's jobs claims come in good as well.
US equities look like they're able to catch support as the SPX500 finds support on the 200 SMA on the 4H chart. Lower inflation data could be indicating that the market will find some momentum to the upside. However, price has to break above that previous top to get that extra for it to look truly bullish in my opinion. We are looking at a series of higher highs and lower lows which could mean the SPX is in a wedge for the time being.
Tech stocks look like they're in the same boat as the NAS100 is starting to form a wedge as well. Resistance lies at $15,543 while the index retraces on a lower high. We could be seeing mixed movement in both indices today as investors try to decide where the market should go.
Jobless claims reported this morning which came in lower than expected, a good sign for investors in the stock market. Expectations were 343K and actual was 310K. Prices in the indices were pushing higher in the morning and are now fluctuating on the open.
I think this is good news for the indices which usually perform based on economic news like unemployment rate and output. This news also suggests that the US is on track for a lower unemployment rate. Tomorrow's PPI numbers will also be a big factor in the index's behavior, but today's claims could have catalyzed an uptrend for the day.
The index already saw a huge bounce on the 4H timeframe after dipping to the lows of $4486 which could serve as new support now. The past 12 hours has been very good for stocks as we appear to be rebounding from the uncertainty from yesterday. Price is now near resistance around $4525 with further resistance above that at $4548.
The Nasdaq also rebounded this morning bouncing up from a bottom around $15,560s. Tech stocks already look like they're coming up to the all-time highs at $15,706. There could also be consolidation between these two levels of support and resistance if the market doesn't have enough momentum to break to new highs.
Today's Fed meeting gave us some insight on what could happen with the USD and the US indices as Powell now points towards tapering this year while holding off on the interest rate hikes. SPX500 is up 0.65% on the day while DXY is down 0.32%.
This updated stance given by Fed Chairman Jerome Powell suggests that we could be could be seeing some more bullish potential on the US indices going into the last four months of the year, taking into account the historically-bad month for stocks in September. If there is tapering, that's a sign of an economy that's healthy enough to start operating on its own. And if rates continue to stay this low, there is really no other place to make good return on your money- at least for the remainder of this year.
The S&P went ahead and made all-time-highs again this morning after yesterday's dip from the start of the Jackson Hole Symposium event. The markets could be pricing in the potential tapering by the Fed and buying up stocks. The index could find support around $4484, the 50 DMA, or $4455 on the 4H timeframe if we see a dip.
The NAS100 hits ATH as well breaking the previous high at $15,404 as tech stocks rebound from this week's consolidation and minor pullback. New support lies around $15,264 where price bottomed out which also seems to be the beginning of a rising trend line on the 4H chart.
Unemployment claims came in better than expected at 348K with the expectations of 362K, and last week's numbers were 377K. So from a jobs standpoint, the US looks strong, and this has led the Fed to start eyeing the potential tapering of bond assets by the end of this year. A major concern for most investors is still the looming fear of long term inflation coming in higher than expected by year end, and this has contributed to the sell off in recent days.
This is a very small pullback in the market compared to what analysts are fearing will happen, but I also think that this level is a strong one. Usually, the market starts running out of steam in September, and that is when you see larger pullbacks. I'm not saying that won't happen in August, but I do think that we still have some room to run in the meantime. I'm writing this a few minutes before open, so the market is hardly moving compared to when the trading day starts, but I do think that this level is worth considering. If the market pushes lower, we might not see any kind of bounce until $4271.
SPX500 on the1D chart is clinging to a rising trend line in the premarket which is also the index's 50-day moving average. This could serve as a strong level of support and take price back up to test the highs. If price crosses under this level, support lies around $4271.
NAS100 is also hitting its 50 DMA and seemingly bouncing up from the lows on the 1D chart. A triple top at the $15,100s zone will be a tough level to break, but the index could come up to test it once more should price maintain above this moving average.
This week, me and Nick caught a crazy move on the SPX500 that we are currently still in at the time of writing this. This one move has netted us around 1,500 pips in equity. We haven't closed, so this number will not be the same when the trade is over, but this article will go over what we saw, where we thought SPX was going to go, and what we did.
What we saw
Over the past month or so, the jobs market population started showing a much larger growth than previous months as businesses started opening back up and were desperate to hire. People flooded into the labor force looking for jobs. With more people trying to get jobs, the more temporary unemployment there was. So, unemployment claims and unemployment rates went up. But companies were still hiring, just not to the pace of the growing numbers of the job market.
What might have been considered an economic slowdown on the surface actually seemed like a sign of growth to us. Our analysis can be referenced here and here.
Where we thought SPX would go
From July 15th to the 19th, SPX continued to sink and eventually crossed under a recent bottom that was supposed to be support. On July 19th, the market had corrected nearly 4% from the highs which seemed like an overreaction to us. And on that same day, price had touched a big indicator for support at the 50 Day moving average. This level was going to determine whether price will fall lower to a bottom in June or come back to test highs.
What we did
We then went to smaller timeframes to look for decent entries. After price had hit its 50 DMA, it bounced, but that didn't necessarily guarantee a full recovery from the lows. Finally, on the 1H chart, we saw a consolidation zone where priced topped out. We were looking for a breakout above this level which did end up working out. When price showed us that it was breaking above, we bought in.
Now we're trailing our play so we don't have to close out at a fixed TP level which is so we can try to maximize our gains. We will either close out in around 1000 pips profit if price comes down from here, or we will continue to trail our stops.
The great thing about this strategy is that when we catch big winners, they really move in our favor. If we're wrong, we get stopped out in the red or at break even. A lot of the time, these big movers are rare and don't usually happen. But when they do, they really pay off.
So, fortunately we were able to catch a good swing on this trade and were aware of the risks involved. Thanks for reading up on this quick rundown of the S&P trade breakdown. Hope you all enjoyed!