Learn to Trade – Equity Index 2nd August
Overview
Last week equity markets remained fairly resilient only slipping slightly, whilst holding above key technical support. Overall the macro fundamental releases last week were solid with GDP coming in close to expectations. This week is another important one with the latest interest rate decisions from the BOE and ECB accompanied by this months jobs report out of the US.
Thoughts from the trading floor
From a technical perspective equities appear to have consolidated their recent gains holding above some key support levels. The S&P 500 future re-tested the broken daily downtrend and held providing a bullish signal. If the market was to continue its upward trend this week the first significant target would be daily resistance at 1129.50, a level formed in late June, beyond that further resistance can be found at 1147.50. If the break of the trend line was to fail the market could quickly test lower with the 2010 lows at 1002.75 coming under threat.
This week traders will be fully focused once again on fundamental releases with the latest jobs data out of the US (Friday) the key event. Currently analysts are expecting the data will show a further 73k jobs were lost from the US economy last month fueling fears of a second wave of contraction. Many traders may focus on the private payrolls number which should once again show jobs were created, if this was to turn negative a strong market reaction would likely ensue. This week we will also see some confidence data from the US in the form of ISM non/manufacturing which will gain attention and the latest ECB and BOE rate decisions where bulls will require further dovish statements.
Despite the good stress test results last month the interbank lending market has found itself under increasing pressure in recent times as 3 month Euribor has shown steady gains in yield over the last two weeks. It did finally show a slight drop off in Friday however this is believed to be a reaction to the belief that the ECB will announce an extension of LTRO through year end. If we fail to see the ECB adjust their stance this Friday we may see further difficulties in the credit markets which would have bearish connotations for equities.
Important events this week.
- Monday: ISM Manufacturing US
- Wednesday: ADP Employment Change, ISM Non-Manufacturing US
- Thursday: BOE, ECB Rate Decision
- Friday: Change in Payrolls US
Bull View
Bulls will be looking to build on the strong technical breaks by testing resistance at 1129.50. A break of this level would see a big shift in medium term momentum.
Bear View
Bears will be looking to reassert their authority after a couple of poor weeks. They will be hoping that this weeks fundamental releases will aid their cause.
Futex View
We still remain bearish in the medium term and will continue to sell into rallies. We expect the markets will break aggressively downwards in September so patience remains the key.
Tags: ADP, bear, BOE, bull, ECB, EURIBOR, futex, Futex Investment & Trading Academy, GDP, ISM, LTRO, Payrolls US, S&P, US, US Economy
