The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
US equity markets look to be off to a sluggish start to the week after a long 4 July weekend. Expectations for impressive corporate data to inject some much-needed confidence into the markets are low; general perception is that the expectation-beating figures seen in previous quarters are unlikely to be replicated. Debate in the markets currently revolves around the ability of companies to warrant the price earnings multiples that their share prices are suggesting.
Looking at the S&P 500 specifically, 438 of the companies quoted are now trading over their 50-day moving average. This is hardly surprising, of course, as the index has spent much of the last month setting higher highs. From a technical point of view the divergence between the 200-day moving average and the index is beginning to look a little too large, and a correction could well be in order.
The trend is still bullish but there is an argument that it is now a little bit too over enthusiastic. Even if the markets had had a 5% correction, it would not have broken below the 200-day moving average.