A key session for Wall Street

Today’s trading session should be absolutely key in determining the trade in US equities.

bg_us stocks new 4
Source: Bloomberg

Here, I have looked at the Wall Street cash (Dow Jones) where we can clearly see strong buying support coming at the November swing high and off extremely oversold conditions.

I assess ‘oversold’ by the fact the 9-day RSI (relative strength index) traded below 20 yesterday and to the lowest levels since August 2015. This in isolation is not a reason to buy the index, but it should play into the view that there was limited further downside in the sell-off. At the same time, the market internals had suggested a contrarian ‘buy’, with a mere 10% of stocks trading above their 10-day moving average. There had been excellent participation in the recent selling, but it seems the selling had also become a little extended.

A technical snapback in the equity market has been seen off the 18,000 and the November high (highlighted by the dash lines on the chart), seemingly driven by calming in US fixed income markets.

We are now at levels where price is re-testing the July to August trading range of 18,600 to 18,300 and this arguably puts the market at a key phase. Without giving a specific recommendation, trading the index is all about reacting to price action and letting the market guide you. If the index breaks back into the range today there seems to be a fairly high probability that the index will go onto and re-test the all-time high set on 15 August. However, a rejection from here could suggest the index is ready to push back through 18,000 and short positions will clearly be warranted. Look to add to shorts through 18,000.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material 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 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.