Technical Analysis

Equities seen holding up to start the new week

It is a familiar start to the new week as equities are seen being more optimistic again and we all saw how things turned in the second-half of last week. Some dovish Fed talk on Friday was what really helped to secure a solid week of gains and the positive momentum is carrying forward, well for now at least. But when we look at the S&P 500 chart:

We are now contesting the 5 October high at 3,806 so that might offer some minor resistance, before getting to the 100-day moving average (red line) at around 3,914. That said, the series of lower highs and lower lows is still persisting and that is the major pattern/trend that still has to be respected.

With key central bank meetings coming into focus, traders and investors will also have to pay attention to the bond market. For now, Treasury yields are off its recent highs and that is providing some comfort for stocks. However, the long-end is still a bit iffy and that is something to consider as we move towards the FOMC meeting in two weeks’ time.

In any case, the technicals are still suggesting that while sentiment has improved in the past week or so, we’re still not quite near any major turnaround in the bearish trend. It will now come down to what central banks have to offer before deciding on the next steps.

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