S&P Index Chart Analysis

  • S&P 500 continues to grind higher amidst occurrences of second/third waves of Covid-19 across the globe. The Feds have decided to continue with their buying programme which gives the equity markets support. With stock markets strong, something has to give – we saw USD devalue over the past couple of months. This indicates that the potential downside of Fed’s QE programme has already started to price in as a whole, i.e. equity gains eroded by forex weakness.

  • Technically, we see that the momentum has been fading as seen through smaller bull bars and more red bars coming into the mix. S&P 500 seems to be testing the gap on 24th Feb which was the start of the downward spike. At this level, bulls who bought below will start to take profits while other bulls will think the down move has been erased and want to go long. Bears who shorted earlier but did not take profits below may want to get out at breakeven / small loss while other bears may think another down leg is due. This confusion causes a tight trading range and a breakout in either direction could result on follow through momentum should stops get triggered.

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