S&P 500 Hits Another Record as Markets Prepare for More QE
Global stock markets are continuing with their post summer rallies, as the generalized market has shifted from its prior expectations of “tapering” in quantitative easing stimulus programs. This has helped push the S&P 500 to new record highs (and a record weekly close), as the index now trades well above the 1750 level for the first time. If we remember back to the early summer, an event like this should be something of a surprise, because this is when most of the market (roughly a 2/3 majority) expected that the US Federal Reserve would start reducing its stimulus programs. Monthly asset purchases are still holding firmly at $85 billion each month in purchases of Treasuries and mortgage backed securities.
So, the main question for spread betting traders as we move into the final months of the year is whether or not this renewed bias will continue. Will the Fed actually start to taper its monthly asset purchases? Or will the Fed try to keep the economy supported a little longer. This is the central question going forward, and the fate of stocks in both the US and around the world depends on the answer.
Moving forward, the key thing to watch for will be public commentaries made by voting members of the central bank. It is highly likely that these events will have more of an influence on stock valuations that even hard market data, and any new announcements could spark surprise volatility in spread betting markets.
The S&P 500 continues to press ahead and is trading at record levels. For traditional support and resistance trading strategies, this makes it very difficult to find areas to sell or to take profits in long positions. Because of this, it makes much more sense to wait for dips into support before entering long once again. The first area to watch on the downside comes in at 1720. This is a strong area of corrective support that can be used to establish new long positions.
The FTSE 100 broke some important medium term resistance levels in the 6680 region, with very little seen in the way of a pullback afterward. This is highly encouraging for the index and sets the long term target ahead at 6810. It does make sense to wait for dips, however, before getting bullish again as the latest run upward as been mostly one side with few bearish corrections.
The DAX rally has been nothing short of impressive and prices are now on a clear path to test the 9000 level. An upside breach here would be a highly bullish event, as the psychological implications there would be undeniable. Wait for dips back into 8880 before buying once again, so that overbought short term indicators have an opportunity to rewind back to a more manageable level.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.