All trading involves risk. Losses can exceed deposits.
Over 40 years’ heritage
Over 185,000 clients worldwide
Over 15,000 markets

US indices about to collapse?

The level every trader should be watching.

All trading involves risk. Losses can exceed deposits.

Without focusing too greatly on the fundamentals of the US equity markets, or even the macro environment that will largely dictate investment flows, we can see there is a very clear line in the sand, where a technical break will suggest increasing short positions in US indices.

That level in the US 500 cash is 2116, which represents both the September low and 38.2% retracement of the June to August rally. A firm close below 2116 will therefore suggest a likely move towards 2000, with market volatility likely to increase accordingly.

For Wall Street Cash , a firm daily close below 18000 would trigger a strong sell signal and the bias should again be to trade on the short side.

If we focus on the daily chart we can see that the Wall Street cash has broken below the rising trend support within the September consolidation triangle pattern. This would in theory target the 17,500 area, but I specifically want to see the index close below 18000 to 17990 area to confirm a more bearish bias. As we can see from the blue rectangle area, the market has been happy to support into this area, so a close below here would signal the bears are in full control.

I would be looking to increase short exposure to US equity markets on a close through 2116 and 17990. Put this on the radar.

Wall Street
Click to enlarge

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.

Find articles by analysts

Education

  • Leverage and risk

    Learn how you can use leverage to gain a large exposure to a financial market with a relatively small initial outlay. Leverage can magnify your profits, but we explain that it’s important to use it with care, because it also increases your risk of loss.

  • Ways to trade forex

    Discover how the world’s largest and most liquid financial market operates. We explain how international currencies are traded and give you the key facts you need to know before you enter this popular market.

  • Orders, stops and limits

    In this section we introduce our trading platform and illustrate the ease with which you can place a bet on a wide range of markets. We also cover features such as stops and limits and explain how spread betting with leverage works.