Learn to Trade Equity Index 26th July
Overview
Last week was strong for equity markets and despite some volatile trading conditions positive sentiment appeared to be returning. The week ended with the European bank stress test results which brought no surprises and provided the catalyst for a strong close. This week will see the release of a lot of US macro data culminating in the Advanced GDP, a number which will hold great significance.
Thoughts from the trading floor
From a technical perspective equities appeare to have turned slightly bullish after Fridays strong close saw the S&P 500 future break a daily trend line. In the early parts of this week all eyes will be on whether this break can be built upon, for this to occur bulls will have to hold the market above the broken trend line currently at 1087.50. If we are to see a break to the upside the first significant target should be daily resistance at 1129.50, a level formed in late June. Above here further resistance lies at 1174.75. 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.
Now we are well into the earnings season traders feel they have a good idea of how US firms have performed and the verdict is solid, but not great. This is represented by the sideways movement we have seen in the S&P 500 over the last few weeks. Now everyones attention will be fully focused on the raft of macro data released this week. Any more signs of unexpected weakness in consumer confidence or durable goods will undoubtedly lead to more uncertainty and equity selling. The key figure this week will be the Advanced GDP number, a shock to the downside here could result in all out panic and would set the tone for a equity slump in Autumn.
Last Friday we had the European banks stress test results announced . Overall 7 of the 91 banks tested failed however this was already expected and priced into the market. The more important result will be whether the tests were seen as stringent enough to satisfy investors' concerns. If the consensus is no, the test may have done more harm than good and we may see some of the scenarios outlined come to fruition over the next 12 months.
Important events this week.
- Monday: New Home Sales US
- Tuesday: Consumer Confidence US
- Wednesday: Durable Good Orders, Fed's Beige Books
- Thursday: Initial Jobless Claims
- Friday: GDP US (A), Chicago PMI, Michigan Confidence
Bull View
Bulls will be looking to take advantage of the technical break in the S&P 500 and in doing so test resistance at 1129.50. Solid fundamental releases this week would really aid their cause.
Bear View
Bears will have to be careful over the next few weeks or all their work over the last few weeks could be undone very quickly by a technically driven rally. They will eagerly await this Fridays GDP release for confirmation of a second US slowdown.
Futex View
We expect trading conditions to be very volatile this week as the macro releases are digested my the market. We remain bearish and will continue to sell into rallies.
Tags: equity, futex, index, learn to trade, market profile
