In today's analysis I would like to share my view on the sp500.
Since the last FED meeting and the prudence by Jerome Powell the actual Fed chairman is viewing the rhythm of economic recovery, the market stopped his recent rally and started to sell off quite intensively.
After the last Friday sell off we haven't seen much of movement and the broad market is lacking direction. Fundamentally, there is several unknown variables and risk that put the markets in wait and see mode.
There is the risk that in my opinion can be material to the path of recovery of the global economy :
1. Most important risk and unknown is the second wave probability and it's strength before we found a vaccine
2. Ability to keep afloat structurally profitable business with cash flow to face credit obligation and normal liquidity that their business need till the sanitary crisis is over and people's movement back to pre-corona levels
3. Ability to keep individuals working or to keep them in sufficient cash to face normal spending for housing and first necessities + interest payment till the sanitary crisis is over
Since we are 3 months away from the global lock down which started in march,we are going to see much of this risk and unknown unfold in the coming month ( 2nd quarter results), with the second wave occurrence, bankruptcy rate and retails consumption.
On a technical point of view, the recent bounce back has a V shape form. The view of market participants is clear and the massive injection of liquidity helped the markets sustain the upside move but as the upside potential diminish as we got closer to all time highs, the downside risk increases hence the profit taking.
The key levels to watch to keep the long bias is the save guarding of the 2990 levels and the break of the 3150 to see more upside potential. Till one of this two levels breaks clearly there is nothing to do on this market in my opinion.
Hope this help
Like or comment if you like or want improvement on the format,
Many thanks,
Atraderinthecity
