Brent oil is currently on a bullish trend, facing resistance near $84 and supported by the 200-day EMA. Breaking above this level could lead to a climb towards $90. Short-term support is observed around $80, backed by the 50-day EMA. As summer approaches and travel increases, crude oil tends to benefit from seasonal patterns. Despite temporary setbacks, buying...
S&P: before the sun rises
2020-07-24 • Updated
A month ago, we wrote an analysis forecasting the possible area of S&P’s movement. So far, it goes exactly as prescribed. The current trajectory lies in the upper layer of the Zone 1 as per that article. That zone was considered as the most probable and moderate movement area from the point of view at the end of June. But the question is, what lies ahead?
Going a bit more fundamental, we have to recognize the following: mostly, the latest bullish advance of the stock market was the result of the optimism of the tech sector. Hence, let’s see the tech sector.
Nvidia is a strong performer. Not a star or giant like Tesla or Amazon (none of which is exclusively a tech company), but a really strong performer. Nvidia already found its way to fall into the pre-crisis trajectory as it is clearly visible at the daily chart below. And currently, a brief look suggests that it just bounced down after tipping above the upper border of the channel. Hence, we are in expectation of a downward correction – probably to the lower border of the channel. With the current dynamic, it will probably come down to the range of 390.
But that was the spearheading part of the stock market that contributed most fuel to its latest push. Noting that the other part consists of “weaker” stocks that are slower in recovery, let’s look at those.
Mastercard hasn’t reached the pre-virus trajectory yet. It has been in a large sideways channel during the last two months. Currently, it seems to bounce down from the upper border of that channel. In a nutshell, the disposition is very similar to that of Nvidia, but the latter one has an uptrend, while the former is going flat. Hence, some 10% dropdown seems to be coming. After that, probably a bounce upwards.
Now, knowing that the performance of the S&P is roughly an average between the bullish tech sector and sluggish remaining stocks, here is what we have with the S&P.
A trajectory slightly more recovered and bullish than that of Mastercard but way less aggressive than that of Nvidia. The dynamic is the same though: a channel, tipping above it, most probably a slide down, and then – expectedly – bounce upwards.
For this reason, yes, it makes sense to expect a dropdown in the stock market and the S&P in the coming days and possibly weeks. But that’s the main thing: it has been foreseen, and it is within a moderate and reasonable projection. In our previous review, we already mentioned than the current sideways period may be protracted horizontally and even last until there are firm victories over the virus in the US. For this reason, just keep patience: it is another night before the sun rises once again.
Bearish Scenario: Sales below 78.99 with TP1: 77.93, TP2: 77.45, and upon its breakout TP3: 76.56 and TP4: 75.70 Bullish Scenario: Purchases above 78.00 (wait for a pullback to this area) with TP1: 1679.00 (uncovered POC*), TP2: 79.33, and TP3: 79.66 intraday
Bearish Scenario: Sales below 80.00 with TP1: 79.34, TP2: 78.94, TP3: 78.55, and 78.00 Bullish Scenario: Buys above 78.00 (wait for a retracement to the zone) with TP: 79.34 TP2: 80.00, and TP3: 81.00
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