The S&P 500 continued its short-term correction.
Futures on the S&P 500 continue to fall as the new trading week begins, testing the 50-week moving average that the broader index returned just two weeks ago. According to recent comments, some members of the Federal Reserve are determined to raise interest rates to combat high inflation. This worries investors who have been relying on a less aggressive central bank for weeks. Last week, Wall Street’s rally was disrupted – the US stock barometer closed the red mark for the first five weeks. To end the uptrend, the bears would need to break the support at 4,113 points (lower than August 9th), which is about 2% away.
EURUSD fell on Monday and is about to test parity. This will be the second test since mid-July and the third in two decades. It last fell below the psychological mark on July 14, if only for a few minutes. A sustained break to the downside would confirm a long-term downtrend and open up more downside opportunities. The next big target for the bears could be 0.9607 – the September 2002 low. The pair is down 370 pips – about 3.5% – from the high of two weeks ago. In turn, the bulls are hoping to defend parity and establish a bottom.
The DE30 is down 200 points after the first hour of trading, breaking a key area of support: the 50-day moving average and the August 10 low of 13,447 points. A break of the daily close would signal a reversal of the short-term uptrend. Bulls would plead for a sharp correction to the rally that started in July, while bears could bet on the start of a new major sell-off. In any case, the medium-term downtrend remains intact as the overall structure of lower lows and lower highs remains in place and DE30 is trading well below the 50-week EMA. Also note that the advance has stopped at the 38.2% retracement of the previous downwave.
Maximilian Wiencke, CFTE
Market Analyst at XTB
Disclosure according to § 80 WpHG for the purpose of possible conflicts of interest
The author does not currently invest in the securities discussed or in the underlying.
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