The S&P 500 index has recovered from dynamic support and is now heading towards a new high. Investors bought in the dip as dynamic support held.
Risk-on had a strong comeback yesterday. US equities led the way, with all indices recovering most of Monday’s move lower.
The S&P500 is back above 4,340 points, and the move higher triggered similar strength in the European indices too. As such, the Ibex is up close to 2% today, the DAX is up close to 1%, and the FTSE 100 index is trading close to the 7,000 level once again.
The risk-on move triggered a bounce in the Japanese yen pairs. Most notably, the EUR/JPY is up over one hundred points since yesterday’s lows, threatening to break above 130 ahead of the European Central Bank decision tomorrow.
Commodities benefited as well. Gold is holding above $1,800 while natural gas is up 1.6%. Crude oil price recovered as well, up 0.93% at the time of writing.
The US equity markets will be the principal drivers behind today’s market activities. As no important economic data is scheduled, investors are basing their actions on the risk-on/risk-off sentiment.
Markets to Watch
S&P 500, EUR/JPY, USD/CAD– markets in focus today.
S&P 500 Outlook
The chart above shows perfectly how the index reacted from dynamic support. By the time the market reached the rising trendline, it bounced and has now recovered most of the lost ground. The bounce looks strong enough for the market to make another attempt at the highs. In any case, as long as the higher lows series holds, the bias remains bullish.
A falling wedge formed on the EUR/JPY pair but the upper trendline is not yet broken. The 130 level remains pivotal ahead of the ECB decision and a daily close above 130 is bullish for the cross. On the flip side, a break below yesterday’s lows invalidates the reversal pattern.
The USD/CAD pair benefited the most from the decline in the crude oil price. Now that the price of oil found support, the USD/CAD has corrected. The focus shifts to the neckline of an inverse head and shoulders. Most of the time the price retests the neckline, and this time should be no different. Also, the decline often reaches the neckline’s projection, so a move towards 1.24 is not off the cards.
Winners and Losers
The US equities recovered most of the lost ground, while the Japanese yen declined.