Equities Forming Tops?

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Global equities suffered from a notable decline over the past few days after higher estimates and fears of a possible rate hike by the Federal Reserve towards the end of this year. This decline is especially a result of the US Jobs Report, which showed a notable increase in YoY wages, and the FOMC meeting minutes, which supported the possibility for higher rates ahead. These factors are leading investors and traders to price in a possible rate hike from now until the end of the year, causing a notable rise in USD which could allow equities and commodities to decline further.

S&P500

S&P50014october

The S&P500 failed to post a new record higher since Mid-August, forming what is called a rounded top with lower lows pattern. Moreover, the index closed lower on Tuesday, forming a bearish engulfing candle on the daily chart. This keeps the bearish outlook unchanged for the time being. In the meantime, the Index got some support at the end of yesterday’s trading from the 2138 area, which represents a solid support after the breakout this year. This would give short term traders some relief for a possible bounce in the coming hours. However, this needs a fundamental catalyst, which might come from today’s economic releases in the US. A disappointment would ease the possibility for a rate hike by the Fed in December, which in return should give some support for global indices and not only the S&P500. Yet, as long as the index stays below the recent record high ahead of the earnings season, the downside move will be more likely than the upside rally.

Levels To Watch

Symbol

S3

S2 S1 Pivot R1 R2

R3

S&P500

2120.25

2126.51 2132.84 2139.10 2145.43 2151.69

2158.02

FTSE100

FTSE10014october

The FTSE100 has a different story. A few days ago, the index managed to print a new record high above 7100, but failed to stabilize or break above that solid resistance which therefore remains a solid resistance since 2015. This occurred despite the fact that Brexit is happening. So why is the index at record high? The short answer is that this is thanks to the Bank of England which increased its asset purchases and cut the main rate to a record low. This move, accompanied by easing of monetary policies is always positive for stocks. However, traders need to be very careful over the next few days. A double top on the weekly chart might be in place, which may change the short term outlook to bearish back toward 6900 and even 6800.

Levels To Watch

Symbol

S3

S2 S1 Pivot R1 R2

R3

FTSE100

6836.54

6883.29 6930.51 6977.26 7024.48 7071.23

7118.45

DAX30

GermanDAX14October

The positive outlook of DAX30 might change soon. The Dax Index managed to rally all the way to 10800 in July of this year, and it is slightly higher YTD. At the same time, the index might be nearing the end of its rally. This is especially because the ECB is not considering to extend the ongoing QE which is supposed to end by March of next year. For the past 10 weeks, the index has been unsuccessfully trying to break above this year’s high. Moreover, the index has formed a bearish shooting star on the weekly chart, which increases the chances for another leg lower next week. If you are considering shorting this index, you need to set your stop loss above 10800. On the downside view, the first support area stands at 10390 followed by 10200. A break through those levels would clear the way for further declines, probably toward the 10,000 key level.

Levels To Watch

Symbol

S3

S2 S1 Pivot R1 R2

R3

DAX30

10283.38

10316.22 10365.15 10397.99 10446.92 10479.76

10528.69

 

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