Let’s Look at the US: S&P 500 and the USDX

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There are a lot analyst opinion pieces floating around, all with the usual “today stocks are at super highs because US recession is no longer looming, deflation is gone, and the labour market is still making good numbers throughout this period of uncertainty.”

Of course, it’s such an easy way of looking at the markets every day, but you can’t deny that this is what it is.

This is the human emotion behind the moves that we’ve been seeing across US markets. Now as a trader, ask yourself whether you believe this run of optimism is warranted or not, and then trade the technical signals in the direction that gives you the biggest chance of being on the right side of a game-changing move if the market has to re-price.

But with the Fed still doing what I’d call a good job in communicating to markets their expectations for the resumption of interest rate hikes and managing market expectations well, a re-pricing on stocks from a fundamental point of view isn’t on the top of my trade ideas list.

S&P 500 4 hour

S&P 500 4 hour

Again, looking at the technicals on the 4 hour SP500 chart from our Vantage FX MT4 platform, I still can’t make a case for a consistent pullback here either.

Intra-day, price is still in the midst of a strong bullish trend, with momentum still obvious following the break-out to record highs the other week. Price now continues to drift sideways in a bullish flag: A reliable continuation pattern as highlighted in the Education Centre of the website.

This is not yet the safest time to get down onto the train tracks and jump in front of momentum.

USDX daily

USDX daily

Moving to currencies and with it being a slower than usual news day (touch wood), we turn our focus to the US Dollar Index and the currency’s near term strength as a whole.

What I did want to highlight is this possible gap-fill play which also sees a nice confluence of trend line resistance.

It’s always handy to keep the USDX chart open with alarms at key levels like this to help in your decision making process when trading the majors.

USDX chart

While we don’t have an economic calendar packed with pending USD sensitive moves, we do have jobless claims and existing home sales to spark some short term price action.

This Wednesday

GBP Average Earnings Index 3m/y

GBP Claimant Count Change

USD Crude Oil Inventories

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This is a guest post originally appeared on Vantage FX blog. Reposted with permission.

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