S&P 500 Posts New Record
Stock markets posted a new record close at the end of last week with bullish optimism largely supported by central bank commentaries. These came on Wednesday as US Fed Chairman Bernanke announced to markets that additional months of quantitative easing stimulus are still a possibility. This was something of a surprise to markets, as investors have recently based most of their positions on the assumption that monetary stimulus injections will see cutbacks in September. Bernanke’s comments will now force many of those investors to revise those expectations (and their accompanying trading positions). Developments like this are positive for global stock markets, and a negative for the US Dollar.
Not surprisingly, some of the biggest moves were seen in the S&P 500, which closed at a new record (on a closing basis) on Friday. Given the strength of these moves, it is highly likely that we will see a new all-time high posted in the index at some stage next week. The only thing that could hinder these prospects would be new comments from the Fed in the opposite direction (suggesting that stimulus programs are no longer necessary and should be reduced). This remains a possibility, as we did see similar comments from Philadelphia Fed President Plosser toward the end of last week. Because of this, spread betting traders will need to pay special attention to central bank statements (rather than macro economic data) when looking to assess the market’s next direction. But it will also be important to keep an eye on corporate earnings, as we will see a large number of reports next week, and this will almost certainly add to stock market volatility on a short-term basis.
The S&P 500 posted strong rallies last week, and closed at its highs in the neighborhood of 1675. This of course is just below the all-time high of 1680, which is the only historical resistance level seen above. Short term traders can take sell positions until 1680 breaks, and once this happens the index becomes a buy on dips. From a medium term price perspective, key support is now seen at 1550, and the general bias remains bullish as long as this support level holds intact.
The FTSE 100 continues to push higher with little in the way of downside corrective retracement. But given the current proximity to Fib resistance levels at 6520, there is reasons to believe these moves could stall next week. A daily close above 6520 would be a highly bullish event however and for longer term traders, this would put the target much higher at 6860. First support now seen at 6490.
The DAX had a very strong close last week, with prices now focused on a test of resistance at 8530. Indicator readings are overbought on a short term basis, however, so spread betting traders should wait for a run back into support at 8140 before getting long again.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.