There has been a notable souring of sentiment today for stock indices around the globe with Asian and European markets in negative territory. This risk-off move has been further supported by the drop in the USDJPY (-1.02%) and the rise in Gold (+0.91%) with the precious metal moving back to within $2 of its 2017 high at 1295/oz.
Traders are now likely looking to the start of the US session to see if this weakness will be sustained or whether there will be a recovery before the day is out. US futures are indicating a red open for Wall Street when the cash session begins and there are some signs that we could have reached a market top.
The US500 recently made a record high of 2439 which could now be seen as resistance. An evening star formation could be forming on D1 but unless there’s a close below 2400 the uptrend remains firmly intact.
First off lets look at the US500 which reached an all time high of 2439 on Friday evening and provides the broadest gauge of US stocks. With the market ending last night’s cash session higher by just under 9% on the year the post election rally has continued in full swing. What has been remarkable about the move higher is the absence of any real pullback, with any dips providing good buying opportunities. When markets are making record highs into uncharted territory there is little by the way of resistance to be easily identified with each new peak providing the only point of reference. After printing 2439 on Friday, yesterday session saw an inside day before this morning we have seen a move below Friday’s low. If this candle were to close here tonight then an evening star pattern would be confirmed which is seen by some traders as a reversal signal.
The US30 has lagged (slightly) the US500 on the move higher and has shown slighlty weaker price action this week. 21225 could offer resistance whilst a break below 21095 could be seen as confirming a false breakout
The current situation on the US30 is similar to that of the US500 with a similar evening star formation trying to form. The market however has not broken above its previous high as strongly as in the case of the US500 and a move, and close, back below 21095 could mean we’ve had a false breakout. The all-time high of 21225 could be viewed as resistance. Year to date gains for this market stand at just over 7%.
The US100 has been the best performing of the three major US stock indices, boosted by the FANG stocks. There price action has been strongest here but it could be argued that there is greater scope for declines given the larger move higher
If the price action in the US30 could be described as slightly weaker than that of the US500 then the US100 has been far stronger. The tech heavy US100 has been boosted by a surge in FANG stocks (Facebook, Apple, Netflix and Google – trades under Alphabet) and is currently higher by almost 17% in 2017. Since the low seen the day after the US election at 4557 the market has rallied 29% to 5890. Short term the price action here is stronger with the market just managing to eke out a record high yesterday and moving above last week’s high. There is less signs of weakness here with price remaining much closer to its all-time high. However given the stronger move up even a pullback to the first Fib retracement at 23.6% would represent a decline of 300 ticks.