S&P 500 - Daily: How serious is this trade war with China?
Sentiment: Short
Market Structure: Confirmed Double Top
Daily Resistance Level: 2950
Daily Support Level: 2800
Other Key Levels: 2700 - 2350 - 2125
November 9th, 2016 - a date we may hear a lot of in the next few months. The S&P 500 hasn’t closed below this day ($2,137) since Trump took office. The market rallied over 45% over the last two years, but this trade war with China has triggered a “national emergency” and is starting to eat into investors profits.
The technicals also line up with the tension from the trade war. Let’s break down the Daily chart to grasp what is in store for the lifeline of the US economy.
Let’s start with the previous high at the $2,940 area. Price creates an all-time high however immediately experienced a loss of -20% to our key level $2,350 breaking through multiple key levels.
Next, price pushes back up creating consistent higher highs and lows. A beautiful, almost artificial trend. This trend is respected for months until price reaches about $2,956, not able to confidently clear the highs created at $2,940. Could be the beginning of a double top with $2,350 acting as a neckline.
Looking closer you see that between May 1-7 a double top is confirmed as it pushes through the neckline.
The following week, we have a confirmed EMA crossover and a test of our support level $2,800.
After the retest of current support, there is a 61.8% retracement on May 15th.
Predictions
Fundamentals: We’re following the trade talks, but most news outlets will try to reinforce a positive sentiment to prevent panic because watching your retirement fund lose 5% in a week is never a reassuring feeling. A positive deal will still result in lingering tension as the two leaders battle it out on the world stage and China tries to hold firm.
Technicals: A conservative predication would include a retrace back to the blue line marked retest area, which is also the neckline of the double top. If we find market structure at the retest area this would create another shorting opportunity. The first target level would be support, the $2,800 level. A riskier prediction would be to look for price to push through the $2,800 level within this week or next. Levels for taking profit would be the 38.2%, and 61.8% retracement levels.
What would make this trade invalid?
View this article on 9to5FX.com
Market Structure: Confirmed Double Top
Daily Resistance Level: 2950
Daily Support Level: 2800
Other Key Levels: 2700 - 2350 - 2125
November 9th, 2016 - a date we may hear a lot of in the next few months. The S&P 500 hasn’t closed below this day ($2,137) since Trump took office. The market rallied over 45% over the last two years, but this trade war with China has triggered a “national emergency” and is starting to eat into investors profits.
The technicals also line up with the tension from the trade war. Let’s break down the Daily chart to grasp what is in store for the lifeline of the US economy.
Let’s start with the previous high at the $2,940 area. Price creates an all-time high however immediately experienced a loss of -20% to our key level $2,350 breaking through multiple key levels.
Next, price pushes back up creating consistent higher highs and lows. A beautiful, almost artificial trend. This trend is respected for months until price reaches about $2,956, not able to confidently clear the highs created at $2,940. Could be the beginning of a double top with $2,350 acting as a neckline.
Looking closer you see that between May 1-7 a double top is confirmed as it pushes through the neckline.
The following week, we have a confirmed EMA crossover and a test of our support level $2,800.
After the retest of current support, there is a 61.8% retracement on May 15th.
Predictions
Fundamentals: We’re following the trade talks, but most news outlets will try to reinforce a positive sentiment to prevent panic because watching your retirement fund lose 5% in a week is never a reassuring feeling. A positive deal will still result in lingering tension as the two leaders battle it out on the world stage and China tries to hold firm.
Technicals: A conservative predication would include a retrace back to the blue line marked retest area, which is also the neckline of the double top. If we find market structure at the retest area this would create another shorting opportunity. The first target level would be support, the $2,800 level. A riskier prediction would be to look for price to push through the $2,800 level within this week or next. Levels for taking profit would be the 38.2%, and 61.8% retracement levels.
What would make this trade invalid?
- If price forms market structure at the $2,800 level I would look for long opportunities.
If news comes out regarding trade talks, I would exit positions until indecision has subsided.
A confirmed break pass the retest area
View this article on 9to5FX.com