Chart of the Day US500 (S&P500)
US500 (S&P500) – Probable Price Paths
Global risk sentiments improved overnight on hints that Russia may be ready to cut its oil output by 1.6mbpd and Algeria confirmed that the OPEC+ meeting will proceed today and consider a 10mbpd cut. The March FOMC minutes revealed that the worst case scenario envisaged a recovery only in 2021, while US health officials continue to talk about reopening the US economy in the coming weeks. The S&P500 gained 3.38% overnight to edge back into bull-market territory with a 23% rally from its 23 March low, while VIX retreated to 43. UST bonds also traded mixed with a steepening bias and the 10-year bond yield rose 5bps to 0.77% to digest the latest bond auction supply ahead of the holiday-shortened week. There is a $90bn four-week bill and $70bn eight-week bill auction today. Separately, the WTO warned that global trade could contract 32% this year.
From a technical and trading perspective, the S&P500 continues to track the seasonal strength referenced in previous analysis, however we are now entering dome decision points, there are two key areas to pay attention to the first is th e2845/2900 area which represents the 50% retracement and equality objectives for the current cycle, if sellers fail to show up here then the next area of attention will be the 3130/3180 area which represents the 78.6% retracement and the 1.61% extension of the current cycle, a sustained break of these levels will open a surge to retest prior cycle highs. With the holiday weekend ahead it is likely that newly minted longs will look to book profits to rescue potential gap wrisk over the weekend, but as 2600 continues to act as support the near term bias is for the short squeeze to persist at least until we test the initial decision point.
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